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The Benefits of Financial Planning

If you’re wondering about whether or not you need to do some financial planning, either on your own, using resources on the internet, or by hiring a financial planner, you might want to know what the benefits of financial planning are.

From my perspective of many years providing financial planning and advice to folks, there are three primary benefits of financial planning: Organization, Efficiency, and Discipline. We’ll talk about each of these in order.

gears can help with organization in financial planningOrganization

One of the most important benefits of financial planning is ORGANIZATION. Statistics tell us that fewer than 25% of Americans know their financial net worth. In addition, (prepare to be astounded) the average individual’s credit card debt is over $8,000. Think about that for a moment…

This figure includes all of those people who pay off their cards each month. How does this happen?? Folks don’t have a handle on the big picture of their personal financial world. If they did, they wouldn’t likely allow themselves to get this far into debt, as they would understand the impact that credit card debt has on everything else in their financial lives.

ORGANIZATION – is the foundation of financial planning. By organizing your finances and gaining an understanding of money flows (inflow is your paycheck, outflow is your electric bill), you have made the first step toward reaching your financial goals in life.

There are a million ways to approach organization, and the point that you need to understand is “how” is no where near as important as “when”. Of course the answer to “when” is NOW.

Some examples of “how” include: MS-Excel spreadsheet,, and Quicken. If your financial life isn’t terribly complicated, an Excel spreadsheet may suit your needs perfectly. However, as you and your financial life continue to evolve, it will eventually become necessary to use something a little more sophisticated, such as or Quicken. I’ve used them both, and don’t really have any qualms against either. As I indicated before, “how” isn’t as important as “when”.

Whatever method you choose, once you’ve set up the system you should enter historic information as far back as 12 months (if you have it). This requires digging out the old bank, investment, and credit card statements and entering the information. This is also where the more sophisticated tools are very useful. In today’s connected world, many times you can simply download the transaction history from your bank, investment, or credit card company, and import it directly into your or Quicken file. You’ll still need to go through and organize things, but much of the data entry is done for you.

If you don’t have the time, the facility or the patience to enter this historic information, don’t give up. Tracking your information from today forward is valuable as well. Think about it… in a year, you’ll have 12 months’ worth of history plugged in to your system!

As you generate this history (or review the old history), you’ll see patterns emerge, with regard to your spending habits. Perhaps you spend MUCH more on golfing related activities than you realized. Or maybe your home decorating expenses were greater than your mortgage payments over the last year. Each of these kinds of patterns help you to understand the “where” associated with your money. Once you know where your money is going, you can begin to control it to put your money where you really want it to go.

Keeping track of your financial information doesn’t have to be an enormous chore. The initial set-up can probably be completed for most folks in a couple of evenings. After that, if you use your money tracking system alongside your checkbook, making entries in the various accounts as you go, keeping this organization intact should be effortless, costing you less than fifteen minutes a month. (Hint: this is a step toward our next topic, Efficiency.)

The next thing that using Quicken or can do for you is to organize your investments. Maybe you’ve got a couple of old IRAs, 401(k)s from former companies, and other investments. These tools can help you to look at these investment accounts from a top-down perspective, getting an understanding of how your overall investments are allocated. For many folks, this will be the first time you’ve ever seen all of your investments in one place. Now we can move on to Efficiency.


As mentioned previously, just using some of the tools we talked about above can help with your efficiency in monitoring your spending habits. When the process is efficient, you’ll maintain your records more readily, keeping track of things all the time. This is the only way I know to get control over your spending activities – by tracking all the time. Using an efficient process will help you to make adjustments to your spending patterns to better reflect your values. Rather than judging each expenditure at the time of payment, you’ll plan out your spending and make better judgments.

In addition, having organized all of your investing accounts you may see where you have overlap in the allocation. You might have thought your investments were diversified properly, but it turns out that all you’ve done is bought essentially the same investments in multiple accounts. A more efficient allocation would be to have many different broad asset classes to spread your investments across. Having organized your investments, you can maintain the investment allocation much more efficiently over time.


Now we’re into the place where the rubber meets the road. Having organized everything in an efficient manner, you need to maintain this organization over time. This requires discipline – when you balance your checkbook at the end of the month, as well as when you receive the statement from your credit card company and/or your investment accounts, you need to ensure that the information you’ve organized is up-to-date with the new information. Using one of the automated tools can help a lot, but you can’t just let it go on autopilot. You need to sort through the information to understand what’s going on with your cash flow and investments.

Based on the information you gather, you might need to change your spending habits. Or perhaps your investments are getting out of line, and you need to rebalance things.

But the biggest piece of discipline that you need to put in play is the where you maintain your investment allocation as planned, even if the market is very volatile. Maintaining your top-down view you can see how your investment allocation is performing. This will help you to keep your discipline about your investments – so that you don’t pull out of the market after a big loss or start buying in after the market has had a huge run up. Oftentimes this is the most difficult discipline to maintain, and it is quite often the major benefit of having a financial planner working for you. He or she can help you to maintain the proper long-term perspective and not let emotions rule the actions.


  1. […] The Benefits of Financial Planning […]

  2. […] “meat” of financial planning. That is to say, once you’ve covered the issues of organizing your information, developing and improving your net worth, and providing for the safety issues, it is now time to […]

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