If you’re like many of our clients, you may struggle with procrastination when it comes to organizing your finances. We get it. Whether it be insurance planning, filing taxes, or putting together an estate plan, most people don’t find the nitty-gritty of financial planning the most exciting of topics. In fact, most people find it completely boring! And that’s okay.
But just because it’s boring doesn’t mean it shouldn’t be done. Delaying completing these tasks can be costly—in time, energy, and money. If you’ve been putting off your financial plan, consider these 5 reasons why you shouldn’t.
1. Missing Out on Growth
Just as saving early allows you to take advantage of massive tax savings over time, there is a compound effect that occurs with the money that is actually invested as well. The money contributed to your retirement account each year will grow exponentially over time, but the key part of that equation is time.
A single penny that doubles every day for a month may not seem like much on the surface, especially when compared to $1 million up front. But by the time the 30th day rolls around, you will have over $5 million in pennies. This same concept can be applied to your retirement account, but because retirement investments are at the mercy of the highs and lows of the stock market, it will take more than 30 days to see that kind of growth.
If you wait to invest, you are missing out on growth year after year, and the resulting loss of earnings can be substantial. Not to mention the potential for loss when you try to invest yourself without the proper advice and guidance of a professional. We’ve found that many clients are often invested too conservatively and miss out on the opportunity for significant growth in even just a slightly riskier portfolio.
2. Tax Strategies Take Multiple Years to Implement
Another reason not to put off financial planning is that if you don’t start early, you’ll miss out on several tax strategies that take years to implement, including:
Tax-Advantaged Retirement Savings
If you’re in a high tax bracket, being able to save for retirement with pre-tax dollars is a great advantage because pre-tax contributions reduce your taxable income and ultimately reduce the amount of taxes you owe. This strategy could save you thousands of dollars in taxes each year. The earlier you start, the more you’ll save over the course of your career.
Roth conversions help to increase your retirement savings and decrease your long-term tax liability by transferring funds from a pre-tax retirement vehicle (traditional IRA) to an after-tax account (Roth IRA). This allows your money to grow tax-free for as long as you’d like, and required minimum distributions (RMDs) are avoided as well.
When it comes to withdrawing from your retirement accounts, how you take your distributions can make all the difference. Each retirement asset (employer-sponsored accounts, Social Security, traditional IRAs, etc.) has different tax characteristics. Creating a withdrawal strategy can help lower your tax burden by structuring withdrawals from each income source in a tax-efficient way.
To properly implement these strategies and more, a long-term understanding of your full financial picture is required. Putting off financial planning can leave you stuck with a huge tax bill that could have been avoided.
3. You Might Need More Insurance Than You Think
Insurance is intended to protect you from risk and uncertainty that is simply part of life, whether that’s the unexpected death of a spouse, a debilitating injury, or expensive long-term care costs. The problem is that timing plays an important role in some insurance policies. For example, if you wait too long to purchase long-term care insurance, the premiums can increase considerably. Likewise with life insurance. If you realize that your current policy isn’t enough, but if now you’re older and your health isn’t as good, it’s going to be more difficult to get the coverage you need. Not having the coverage you need is not a risk you want to take.
4. Financial Planning Can Alleviate Stress
Do you feel 100% confident about the myriad of financial choices you make day in and day out? Have you encountered more complexity as your assets have grown? Partnering with a financial professional can help alleviate the stress and anxiety that comes from trying to figure out your finances.
Think about all the time you spend worrying over finances and whether you are saving enough money. Are those thoughts preventing you from making great memories and actually living your life? For many of our clients, the answer is yes. But it doesn’t have to be that way.
Financial planning can help alleviate the stress that comes from not knowing where you stand or how to achieve your goals. It can provide clarity by defining a path from point A to point B, and allowing you to get the most out of your life along the way.
Get Started Today
As you can see, there are many reasons to start the financial planning process sooner rather than later. If you have long-term financial goals, like buying a house, planning a wedding, or saving for retirement, working with a professional is one of the best things you can do to set yourself up for success.
Don’t leave your most important goals and priorities to chance—I can build a custom plan to put your money to work for you, so that you can feel confident in your financial future. Schedule a no-obligation introductory meeting by calling me at (619) 681-1911, emailing firstname.lastname@example.org, or scheduling a time online.
Paul Neves is president and wealth manager at FSI Wealth Management, a leading independent wealth management firm based in San Diego, California. Paul is a CERTIFIED FINANCIAL PLANNER™ professional and a Chartered Financial Consultant®. Working with clients in the financial industry since 1989, Paul has dedicated his life to seeing his clients and their families reach their goals and fulfill the financial plans they have created for their life. He believes that trust and respect are key to building strong, long-lasting relationships with his clients. Paul is known for helping families take the mystery out of preparing for today and tomorrow.
Paul graduated from San Diego State University in 1989 with a bachelor’s degree in business administration, concentrating in financial planning and services. He is currently a resident of Point Loma, California, where he spends his free time with his family and friends either boating, cooking, wine tasting, or traveling. To learn more about Paul, connect with him on LinkedIn.