Myth # 1 – Financial planning is only for the wealthy.
Financial planning is necessary for anyone with a financial goal whether it’s buying a house, paying for college or planning for a successful retirement. Just as most people who take a long road trip either map it out or use GPS, you should do the same with your financial goals.
Myth # 2 – If I can do my own taxes, I must be able to do my own financial planning.
Compared with comprehensive financial planning, preparing income taxes is a breeze.
- Do you know how much and what type of life insurance you need?
- Should you contribute to a regular IRA, a Roth IRA or a 401K?
- Have you done any planning for social security and Medicare?
- Have you completed an estate plan?
- Durable Power of Attorney
- Healthcare Power of Attorney (Healthcare proxy)
- Revocable Living Trust
- Irrevocable Trust
- Irrevocable Life Insurance Trust
- If you have an estate plan:
- Is your estate plan current?
- Should you make changes to your estate plan?
- If you have a trust, is it funded?
- Are all your documents signed?
Myth # 3 – My accountant is smart, he or she will tell me what to do.
While we agree that most accountants are very smart, few are equipped to look at your entire picture. Sure, they’ll take care of your taxes and maybe talk with you about a Roth IRA but few are equipped to have a deep discussion with you about your life, disability, auto and home owners insurance. They are probably not able to calculate how much you should be saving to reach your goals or whether you can take an early retirement offer. These are but a few of the many areas that a financial planner can help you with.
Myth # 4 – With all the online tools available, I’m sure I can do my own planning.
While there is an abundance of online tools available, many don’t talk about the assumptions used in their calculations. Others allow you to input your own assumptions. How can you be sure these assumptions are appropriate for your individual situation? Also, these online tools are incapable of counseling you when a decision you are considering may not be in your best interest. A financial planner can tell you what the impact of your decision will be as it relates to reaching your goals.
Myth #5 – I don’t have to plan until I’m much older.
Plain and simple, the math proves this statement wrong. For example, take your retirement. If you save $500 a month for 30 years at 7%, the future value is approximately $610,000. However, if you wait 20 years and save $500 a month for 10 years at 7%, the future value is approximately $ 86,500. See the problem?