Financial Management And Planning Myths
Managing your finances can be a stressful responsibility due to the potential costs and losses that can be involved. When individuals are misinformed about common aspects of financial planning, they can make mistakes that may hamper their ability to achieve financial stability and prosperity.
Myth: Financial Planning Is Only Needed When You Are Getting Older In Life
A pervasive assumption about financial planning is that it will only be necessary once a person starts to reach an advanced age. Unfortunately, this assumption can deprive individuals of valuable time that could be spent building a portfolio and retirement assets. Individuals should typically start taking the time and energy to create financial plans once they start working full time. Without one of these plans, it can be exceedingly difficult for individuals to stay focused and make smart financial decisions throughout the course of their highest earning years.
Myth: It Is Too Expensive To Use A Professional Financial Planning Service
As with any other professional service, there are fees and costs that will have to be paid. Many individuals may assume that they will always be charged on a performance basis. In addition to potentially being very expensive, this can also provide perverse incentives for the financial planner to take an overly aggressive stance with the portfolio. Luckily, there are fee-based financial planning services that will avoid this potential conflict while also making it much easier to control the costs of using these services.
Myth: You Will Keep The Same Financial Plan For Years
Creating a comprehensive financial plan can be a major undertaking that will involve reflection, planning, and decision making. As a result, individuals can be hesitant about updating their financial plan once it has been made. However, it is important for individuals to review and update this plan periodically and following major changes, such as family additions or job changes. Otherwise, you may be basing your decisions off of an outdated plan that does not currently reflect your financial reality. Luckily, updating one of these plans will be far less work than making it from scratch.
Myth: Financial Planning Will Result In Excessively Higher Taxes
One of the benefits of working with a professional financial planner is that they will be able to help you interpret the tax laws so that you will be able to effectively anticipate the tax impacts that your decisions will have. This can allow for decisions to be made that minimize the tax burden that you will incur.