Debunking the Myths of Financial Planning

This article was written by Jamie Jarrard, BA.

In this second part of our Financial Health Summer Series, we're debunking five common myths about financial planning, to help you understand how a good financial plan is both accessible and an essential part of your overall wellness.

1. Myth: Financial planning is only for the wealthy.
   Fact: Financial planning is for everyone!

   Many people think they don't need a financial plan because they believe they are only for the wealthy. But the opposite is true: financial planning is for everyone! Having a plan helps you make smart choices with your money, no matter your income level.

2. Myth: A budget is the same thing as a financial plan.
   Fact: A budget is just one part of your financial plan.

   Think of your financial plan as a toolbox, and your budget as a tool that helps you track your expected income and expenses. While important, your budget only provides part of the picture of your overall finances. To truly understand your finances, you should include other tools like retirement planning, investments, and savings. You need to fully stock your financial toolbox to achieve your financial goals.

3. Myth: Financial planning is the same as retirement planning.
   Fact: Retirement savings is just one part of financial planning.

   Just like your budget, your retirement savings is only one of the tools in your financial toolbox. A well-equipped financial plan includes other tools as well: budget, income, expenses, insurance information, savings, and investments. A healthy financial plan takes account of all of these to give you the big picture of your budget strategy.

4. Myth: I am good with numbers, so I do not need a financial advisor.
   Fact: Financial advisors are a useful tool for everyone.

   A knack for numbers is a valuable skill, especially when managing your personal or family budget. But even if you’re great with numbers, seeking help from a professional can be beneficial, as they offer extra insight, skill, and often advanced education. The are 8 types of financial advisors (A):

   • 1) Financial Consultant: A financial consultant helps individuals with their overall personal financial goals, including plans to pay off debt, buy a house, invest, plan for retirement, and build a budget.

   • 2) Certified Financial Planner (CFP): A CFP is a Financial Consultant who has undergone extra years of training and experience and passed a board exam to earn their Certification.

   • 3) Financial Coach: A financial coach is like a financial advisor, but they do not offer investment advice. A financial coach may be the right option for you if you are looking for help with overall budget, but do not plan on making investments.

   • 4) Investment Advisor: An investment advisor gives specific advice on your investments, including stocks, bonds, and mutual funds.

   • 5) Wealth Advisor: Wealth advisors are financial advisors with degrees and licenses. Most of them have a degree or an advanced degree in finance, and many also have additional certifications like Masters in Business Administration (MBA), Certified Financial Analyst (CFA), CFP, or Certified Public Accountant (CPA). They can help plan investments, retirement, taxes, insurance, and estates. (B)

   • 6) Robo-advisor: the simplest option, the robo-advisor offers the same basic services as a CFP, but it is electronic, and not a live person.

   • 7 & 8) Portfolio/Assest Managers & Brokers: Both types of advisors focus solely on investments. Brokers are the middle-men in trading and are required to be licensed.

5.  

   The Myth: Once I have a financial plan, I am all set.
   The Fact: A financial plan needs regular updates.

   Life is not a straight line, and neither are finances. Think of your financial plan as a living document, that needs regular maintenance as you address debts, experience changes in income and expenses, your insurance changes, etc. A good rule of thumb is to review your financial plan once a year and make any needed changes.

By debunking these common misconceptions and creating your own financial plan, you can equip yourself with the tools to make great financial decisions, and create peace of mind as you navigate life with chronic lung disease.

Sources:

A: https://www.nerdwallet.com/article/investing/types-financial-advisors

B: https://www.forbes.com/advisor/investing/financial-advisor/wealth-advisor/