6 Reasons Why You Need a Financial Plan

Wherever you are in your financial journey, a financial plan could help you reach your goals — and show where you are today coupled with an outline of how to ultimately achieve them.

Consider this: when it comes to finances, a most Americans do not have a cohesive plan in place. Recent data suggests that only about 36% of the population1 has any sort of written financial plan. What’s more, many are intimidated by perceived challenges, struggling with where or how to start the process.

According to Senior Financial Planner, Christian Lau, at Synovus Securities, Inc., “The good news is that it’s never too late to start building a financial plan. Now is an ideal time to take stock of your financial situation and take steps to mapping out a more successful financial future.”

Equally important, a financial plan will provide you with a road map of clear action steps designed to get you from here to there.

What's Included in a Financial Plan?

Your financial plan is based on your financial reality, your wants and needs, your goals and the challenges you need to overcome on the way to achieving them. But don’t be intimated by the process.

“Financial planning is like any other project — getting started is often the hardest part,” said Gene Perkins, Head of Private Wealth, Synovus Bank. “Rather than considering the entire planning process all at once, which can be extremely daunting, break it down into small, achievable steps. More advanced actions can be determined at a later point in the process and with the guidance of a professional.”

Be mindful that every financial plan looks a little different — but there are some standard elements:

• A statement of your net worth, which shows all your assets (like cash and investments) and liabilities (like debt). Your net worth is your assets minus any liabilities, and it helps show where you financially stand today.
  

  “Once you have made an initial list of your short and long-term goals, go a little deeper and consider your household balance sheet,” said Lau. “This includes a slightly more detailed picture of income and expenditures; assets and liabilities; investments; and tax/titling considerations. Issues like estate taxes and family businesses may be included as part of this process.”

  Which segues to the next step.

• A look at your current cash flow, which is the money coming in and going out of your accounts each month. The plan might include suggestions on how you can adjust your cash flow so you have more to save and invest.
  

  According to Lau, “After the household balance sheet has been created, a more granular cash flow analysis can help identify if you are overspending and need to put more money into savings or retirement accounts to meet your financial goals.”

• An analysis of your biggest financial goals and how much money you may need to reach them. Your plan should also include a breakdown of the steps you need to take between now and when you want to achieve that goal.
  

  “Cash flow analysis is an especially important part of planning for a major purchase (home, car, college) or life transition, such as graduation, parenthood or retirement,” added Lau.

  Indeed, you might need to account for buying a home or starting a business. Other people may need a debt repayment strategy or a plan for saving for their kids' college education.

  Synovus offers Financial Needs Assessments in-branch to help you with this.

• A retirement plan that helps you understand what you'll need to cover your living expenses after you stop working. That could also mean an analysis of the accounts you should invest in, how much you should contribute and any tax strategies2 you can take advantage of to maximize how much you keep in your nest egg.
  
  
• An investment strategy that's appropriate for your risk tolerance and capacity, time horizons for your goals and your own personal philosophy on investing your money.
  
  
• Reviews and recommendations on insurance coverage, estate planning needs, and any other special considerations specific to you and your financial life. This will largely depend on what you want to do with your money and what other financial responsibilities or obligations you might have.