Part of a financial planning series.
Not sure you need a financial plan? This article is part of a series on why you might benefit from working with an independent fiduciary advisor to create a financial plan.
You may know what you need, and it's likely that you have some clear goals for what you would do if you won the lottery. But how can you make informed choices based on what you have? How will you take meaningful but conservative financial steps for the future? One reason you might benefit from going through the financial planning process is:
1. To know your required rate of return.
Do you know, based on your current rate of savings and amount of assets, what rate of return you need to achieve annually to meet all your goals?
Having a goal to beat the market year after year is not an investment plan. If the market falls 30% and your investments fall 28%, you beat the market, but was that your intent?
After going through the planning process, we have seen many cases in which, for clients to achieve all their goals, a very low rate of return is required. If this is the case, we may ask, why take on additional, unnecessary risk?
Working through the financial planning process with an experienced fiduciary advisor can help you clearly identify your current assets and liabilities, your specific goals, your needs for the future, and an investment plan that considers your risk tolerance, time horizon, and required rate of return.
Good financial planning may address the things you know you need first, and only after your lifestyle needs are covered, consider how to achieve your reach goals.
Next post in this series:
Reason 2 of 5 You Need a Financial Plan