A financial plan is a comprehensive evaluation of an individual’s current and future financial state. We all know the importance of creating a solid financial plan but most people fail to do it. Even the few that do create one fail to follow up and update it as the years pass and their financial situation changes. Here are two mistakes most investors make when they create a financial plan.
They Don’t Follow-Through:
Even though people pay money to create a financial plan, most investors do not follow it and actually implement the advice in the plan. It’s amazing- but if you speak to enough Certified Financial Planners (CFPs), they will tell you that most people do not follow through with the mutually agreed upon financial plan. I spoke to John C Pak, CFP® RICP® Financial Planner at Otium Advisory Group in Los Angeles California, and he told me that it is very common for people to create a financial plan but fail to implement it. John told me about one example, “I had reached out to the young client 90 days after our last meeting to follow up on the tasks assigned to him and he admitted life got busy and the plan was somewhere collecting dust.” You would think this is an isolated one-off event. Surprisingly, it’s not. It happens often.
They Don’t Update It:
Just about everything in life needs to be updated/maintained. If you buy a new car, you need to maintain it. If you buy a house, a computer, a building, the list goes on and on, just about everything in life, needs to be maintained. The same is true for a financial plan. In addition to not implementing the advice in the financial plan, the second biggest mistake that most people make when creating a financial plan is that they do not update it when their financial situation changes. Research shows us that the best financial plans are updated and evolve throughout time.
I recommend most people create a financial plan. Then, please take the time to implement it and update it. Because if you don’t, the only person you are hurting is your future self.
This article was written by Adam Sarhan from Forbes and was legally licensed by AdvisorStream through the NewsCred publisher network.
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