Though often associated with the ultra-rich, the principles of financial planning apply across the full spectrum of wealth, income and age. Similarly, the role of a financial planner extends beyond investment advice and estate planning to the most fundamental fiscal realities of day-to-day living.
Working with people in achieving their goals and dreams, financial planners help clients identify the path from where they are to where they want to be. While negotiating the fiscal realities that arise at every stage of life — such as education, marriage, parenthood and retirement — financial planners also help clients stay accountable to their big-picture goals with concrete steps to take in the present.
This financial action plan is more commonly known as a budget. Though often perceived as restrictive, budgets are a powerful tool in achieving financial freedom. By breaking down big dreams into manageable annual, monthly and weekly targets, budgets provide tangible structure and accountability for successful goal achievement.
What a Financial Planner Can See in Your Budget That You Can’t
1. Financial Implications of Lifestyle Changes
Financial planners often have experience navigating fiscal territory that is still new to their clients. For instance, you might be having your first child or getting ready for retirement, which are major lifestyle changes with many unknowns. A financial planner, however, can bring the value of his or her past experience working with individuals who’ve made similar lifestyle shifts to create a more comprehensive budget that accounts for contingencies and considers larger financial implications.
2. Unrealistic Spending Targets
“Clients tend to underestimate their expenses — especially their miscellaneous spending,” said Alex Hopkin, financial planner at Military Planners. “A budget is not going to be perfect the first month, but I can usually help keep them from getting too far off track.”
3. Financial Imbalances
Financial planners can also help identify areas where you might be unknowingly overspending and therefore sacrificing greater savings goals. Brad Sherman, founder of Sherman Wealth Management in Gaithersburg, Md., helps clients find money in their budgets by listing all expenses. “To determine where your budget is out of balance, export all spending to a spreadsheet and track monthly,” he said.
4. Emotional Spending
Financial planners can also provide objectivity. Goals and dreams are emotional, and money, being a primary tool in achieving those ends, often becomes subject to emotional influences. Financial planners can provide the necessary objectivity and accountability to keep individuals on track toward their fiscal goals, even when emotions threaten to thwart personal efforts.
Budgeting Techniques Financial Planners Recommend
Budgets can take many forms, such as apps, spreadsheets, software and even pieces of paper. “Everyone is a little different, so it’s about finding what works best for you,” said Kate Holmes, a certified financial planner and founder of Belmore Financial in Las Vegas.
In terms of structure, Holmes recommended Elizabeth Warren’s 50/30/20 budget — designating 50 percent of net take-home pay for necessities, 30 percent for discretionary expenses (wants) and 20 percent for debt pay-off and savings.
Digital budgeting platform LearnVest can also help you with creating a budget. The platform will even connect you with one of its financial planners. For $19 a month, plus a one-time $299 setup fee, LearnVest provides affordable access to a financial planner that can create a budget to serve goals — combining digital, visual and personal approaches.
How to Stick to the Budget You and Your Financial Planner Make
Once you have your financial planner budget in hand, use these recommended strategies for sticking to it:
Andrew McFadden, a certified financial planner and founder of Panoramic Financial in Fresno, Calif., tells his clients to set it and forget it. “Once you have decided how much you want to save towards your goals and how much to pay towards your debt, be sure to automate those payments right after you get your paycheck,” he said. “If you wait to the end of the month to try to make your contributions, there will likely be little to nothing left.”
“Awareness of spending is the key to getting it under control,” said Mark Zoril, an accredited investment fiduciary and founder of PlanVision in Plymouth, Minn. “As I talk with clients about budgeting, I suggest that they consider having a log where they write down what they spend money on each day. Have it on the refrigerator, or tabletop or somewhere prominent. This process will help people become very aware of their spending habits.”
Tracking promotes mindfulness and encourages accountability to existing budget plans.
3. Budget in the Fun Stuff
Neil Palache, a certified women’s money coach and CEO of the Wealth Creator Company for Women in Westlake Village, Calif., warns against “crash budgeting.”
“Giving yourself permission to spend is part of the solution,” he said. “Occasionally buy that special coffee or sweater. Make it part of your plan. Even a strict dietary plan has to have some dessert now and again.”
When to Review Your Budget With Your Financial Planner
Checking in with a financial planner somewhat regularly is also a useful strategy in sticking to your budget, and it’s good practice in maintaining fiscal health.
In an article for LearnVest, Chessie Advisors founder Erik Klumpp wrote, “The idea of having [an advisor] working with you throughout various stages of your life is akin to seeing a doctor over time for annual checkups. The relationship you build with your doctors helps you spot a disease in its early stages, instead of just going to a doctor after you’re in tremendous pain.”
As major life changes like a new job, business venture or sending your kids to college arise, check in with your financial planner to adjust your spending plan, accommodating for your new spending priorities.
A financial planner can help build your initial budget and provide ongoing guidance in navigating shifting priorities and achieving evolving dreams.