3 Reasons Why You Need a Financial Plan


The last few months of the year provide an opportunity to review your financial progress and set goals for the year ahead. Unfortunately, only 30% of Americans have a long-term financial plan, according to Gallup. If you’re one of the many Americans who don’t have a formal strategy for managing your money, here are three reasons you need a financial plan.

What Is a Financial Plan?

A financial plan is a roadmap to the future you envision for yourself. Whether you’re expanding your family, hoping to buy your dream home, or preparing for retirement, a written plan is one of the best ways to reach your financial goals. In other words, it can help you avoid expensive mistakes and make decisions aligned with your long-term objectives.  

Indeed, your investment decisions are one of the driving forces behind your financial progress. In fact, more than 90 percent of the variability of a portfolio’s performance over time is attributable to asset allocation, according to some well-known studies. Still, before you can determine an effective asset allocation, you need a financial plan.

Here are three reasons you need a financial plan:

#1: It Documents Your Goals

Several factors go into developing an appropriate investment strategy. For example, your risk tolerance and time horizon affect the types of investments you should consider. Your goals also drive your investments, as well as your day-to-day and long-term financial decisions.

A written plan clearly details each of these factors. In addition, it documents additional circumstances that may impact your financial decisions. A plan also provides an opportunity to adjust course as your goals and circumstances change.

#2: It Guides Important Financial Decisions Over Time

Your financial plan is a living document. In other words, it changes as you, your family, and your financial goals and circumstances evolve. As such, a plan provides a roadmap for important financial decisions over time—including your investment strategy.

For example, you may expect to retire in 20 years. Therefore, your retirement savings can be primarily invested in growth-oriented investments like stock funds or commodities. However, as you near retirement, these investments may no longer be appropriate. A documented plan can help you determine when and how to adjust your investment strategy.

#3: A Financial Plan Helps You Stay the Course During Periods of Discomfort

Long-term investors must inevitably endure periods of uncertainty and volatility. Unfortunately, many investors let their emotions take over when markets are in turmoil and subsequently make poor decisions. For example, they may sell their investments and hold cash, only to miss the recovery that follows.

Famed investor Benjamin Graham once said, “The investor’s chief problem—and even his worst enemy—is likely to be himself.” Morningstar’s annual “Mind the Gap” analysis proves this statement year after year. In fact, their research shows that investors not only underperform the market, on average, but they also tend to underperform their own investments due to poorly timed trading decisions. Since a financial plan accounts for short-term volatility, it can help you avoid such mistakes when your emotions start to take over.

A Trusted Financial Advisor Can Help

One of the benefits of working with a trusted advisor is that we can help you develop a plan that makes sense for your financial goals and circumstances. In addition, an advisor can help hold you accountable, so you stick to your plan once it’s developed.

If you need help developing a long-term plan, please contact us to get started. We’d be happy to help you create a roadmap for your financial future.    

1733 Park Street Suite 350 Naperville, IL. 60563

(331) 204-6230 Direct

(331) 229-8632 Fax 


Investment advisory services provided by Lantz Financial, LLC, an SEC registered investment adviser.


Non-investment topics discussed are for informational purposes only and should not be considered legal, tax or cybersecurity advice. Individuals should consult with their own legal, tax or cybersecurity expert concerning their own specific situation.







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