Many may think financial planning is only needed for wealthy investors with complex needs, but the reality is a financial plan is something that can help everyone — not just the wealthy. And your workplace may be able to help you get started.
The fact is, if you have any source of income, you’re always deciding what you’re going to do with it: — what you’ll spend it on (groceries, rent or mortgage, clothes), how much you’ll save. Financial planning simply means having a well-thought-out strategy that helps you achieve longer-term goals while meeting near-term needs. Many employers offer benefits that can help individuals connect with financial coaches, advisers or tools to create a personalized financial plan.
Recent events have highlighted the importance of staying on track financially and preparing for the unexpected, and the stress that can result when we don’t. Lending Tree’s Pandemic Money Survey (opens in new tab) found that 42% of Americans said they cried over their financial situation during the COVID-19 outbreak, but only 18% made a plan to tackle the problem.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Just as it’s impossible to build a skyscraper without a blueprint, we all need a detailed plan to construct a financial framework that takes care of not just our day-to-day needs, but also to lay the groundwork for the future we envision. Creating a practical and actionable financial plan is your first step.
If you can imagine it, you can do it
Morgan Stanley research has found that most investors are concerned with ensuring they can cover their financial needs during their entire lifetime, maintaining or improving their standard of living, and being able to cover unexpected medical costs. But everyone also has unique priorities. What matters most to you: caring for your loved ones, buying a home, preparing for retirement? Maybe it’s all of the above, and more. Regardless of your current financial circumstances, a financial plan can help you see new possibilities and take charge of your future by implementing new tools and behaviors.
This is why many companies now offer financial-planning support to their employees. This may take the form of financial coaching, strategizing or advice to help you identify and move toward your financial goals. Find out if your employer offers access to a financial-planning app or website, education on investment basics, matching contributions on emergency savings, or student debt repayment programs. Together, these workplace benefits can help open the door to a more solid financial future.
Laying the groundwork
Research from the Brookings Institution (opens in new tab) shows that just one-third of Americans are truly financially healthy. Half are just coping, while nearly one in five are financially vulnerable — meaning, they’re struggling with nearly all areas of their financial lives.
To start taking control of your financial future, map out your full financial picture, which includes all your debt (don’t forget the interest rates) and income sources. Two simple tests: Do the math to find out if you have six months of emergency savings readily at hand, and use a basic retirement calculator to see whether you’re on track to cover your future needs. This snapshot can help highlight some of your baseline financial strengths and weaknesses.
Wherever you find yourself, one way to put yourself on more solid ground is to create a goal and then work toward it one step at a time. The key is to make your goals Specific, Measurable, Action-oriented, Realistic and Time-bound (SMART):
- Specific: You can’t achieve a goal unless you know exactly what it is. For example, instead of saying you want to “save more money,” target a specific amount, like $100 more per week.
- Measurable: The goal needs to be something you can track. A goal of saving an extra $100 each week is something you can monitor over time.
- Action-oriented: Define what you’ll do to reach your goal. For example, to save $100 more per week, you might cut back your budget to find an extra $100 each week or freelance on the side.
- Realistic: Is your goal achievable? If saving $100 more per week turns out to be too high, maybe you’d have to adjust the target to $50.
- Time-bound: Every financial goal should have an expiration date, so you know where you are in terms of your progress. When time’s up, you have a clean slate for reassessing and setting a new goal.
With this type of process, you can begin to build a practical financial plan that reflects your goals and priorities. And if your workplace benefits can help you get started, you’ll be one step ahead of the game.
Mapping your future
Creating a financial plan is a basic but necessary step toward securing your financial future, and the support you can access through your workplace may be the difference between always struggling and achieving your goals.
Whatever your financial dreams, your road to success will require patience, diligence and careful planning. Don’t expect to reach your ultimate destination overnight, but the sooner you familiarize yourself with the workplace resources at your disposal and leverage them to create a thoughtful financial plan, the smoother your journey will likely be — no matter what life throws your way.
This article has been prepared for informational purposes only. The information and data in the article have been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. The strategies and/or investments discussed in this article may not be appropriate for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
By providing links to third-party websites or online publication(s)/article(s), Morgan Stanley Smith Barney is not implying an affiliation, sponsorship, endorsement, approval, investigation or verification with the third parties.
Tax laws are complex and subject to change. Morgan Stanley Smith Barney, its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not “fiduciaries” (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in writing by Morgan Stanley and/or as described at www.morganstanley.com/disclosures/dol. Individuals are encouraged to consult their tax and legal advisers (a) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account. © 2021 Morgan Stanley Smith Barney LLC. Member SIPC. CRC#3765213 09/2021
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
-
-
Three Legal Documents Your Child Should Sign When They Turn 18
Legal documents such as durable power of attorney, a healthcare proxy and a HIPAA release can give parents the legal right to make decisions if their child needs help.
-
JetBlue's TrueBlue Loyalty Program Now Gives Perks to Infrequent Flyers
JetBlue's TrueBlue loyalty program added new tiles and Mosaic levels to offers more ways for casual travelers to earn perks more regularly.
-
Three Legal Documents Your Child Should Sign When They Turn 18
Legal documents such as durable power of attorney, a healthcare proxy and a HIPAA release can give parents the legal right to make decisions if their child needs help.
-
Preparing for the Next Recession: Six Considerations for Retirees
Being more disciplined and risk averse in the good times can make it easier to weather the bad times when they inevitably arrive.
-
Finances Aside, What Does a Happy Retirement Look Like?
Three examples of retirees show what it means to thrive in retirement. The common denominators provide clues on how to swing your own happy retirement.
-
Will You Pay Higher Taxes in Retirement?
Your Social Security income and RMDs will most likely combine to deliver a tax torpedo, but there are ways to reduce your income in retirement to pay less tax.
-
Inherited Retirement Plan? How to Easily Understand Payout Rules
Figuring out first which kind of beneficiary you are will make it easier to grasp the rules and timing on required distributions.
-
For Financial Planning Success Now, Start by Looking at the Past
Certain beliefs could be impeding your financial planning, and learning what those are begins with exploring your money-related memories.
-
How Summer Internship Offers Can Go Awry
A student’s personal essay after landing an internship raised a red flag to this business owner that the student wasn’t ready for the responsibility required.
-
How Can Women Worried About Retirement Stay on Track?
Developing a resilient long-term plan is more important than ever as more women fear being blindsided by outside events despite doing all the right things.
