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7 Reasons Why You Need a Financial Advisor to Create a Financial Plan

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Planning is considered to be one of the greatest characteristics of human beings. And, when it comes to your money, having a strong plan is essential as multiple variables can impact your financial goals. The accuracy of your financial plan today can fulfill your future needs and improve your standard of living. This further magnifies the importance of a concrete financial strategy. However, given the increasing monetary complexities and the investment market volatility, it may be difficult to make a plan that is 100% precise. Moreover, a financial plan is not only inclusive of your investments. It is much broader in approach. For this purpose, it may help to engage with a professional financial advisor, who can help you create a comprehensive financial plan, ensuring you achieve your monetary goals.

Here are 7 reasons why you should engage with a financial advisor to create a financial plan:

  1. To create a budget to meet your current needs and to create reserves for future expenses:
  2. Experts emphasize the importance of having a budget as the most critical step in a financial plan. Small numbers can have a significant impact on your savings. However, most people tend to ignore their capacity to save each day and lag behind in creating a solid corpus. A financial advisor can come to your aid here. An advisor can help you create a budget that meets your present needs as well as provides enough reserves for your future. A financial advisor can provide you with detailed insights on how to best spend your income while also meeting your savings goals. The professional can assess your monetary situation, income, expenses, priorities, short-term and long-term goals, etc., to create a budget in line with your objectives like buying a house, setting up a business, paying for your children’s education, etc. Further, your financial advisor not only acts as a guide but also functions as a partner, helping you trim your expenses by consistently reminding you of your targets. Ideally, your advisor can create a zero-based budget, where each dollar has a specific purpose and is spent optimally. This way, you get a defined sum for your non-discretionary expenses (such as rent, mortgage payments, utility bills, medical costs, etc.) and a specific amount for your discretionary expenditure like online subscriptions, dining out, etc. Creating a budget can help you realize where and how much you are overspending and what can be done to better utilize your money. Once you have this insight, you would be able to make better decisions regarding your savings.

  3. To set aside an emergency reserve for any unexpected expenses in the future:
  4. Creating an emergency fund is one of the key aspects of a holistic financial plan. Typically, an emergency reserve is a sum of money you set aside specifically to pay for any unexpected expenses in the future. As per experts, you should keep at least three months of your current living expenses as an emergency reserve. This is not a benchmark and only serves as an indicative figure. The actual amount depends on your current financial position, risk, and life stage (married, single, divorced, etc.). However, you must hold your money in assets that provide you with a reasonable return as well as come to your rescue during your hour of need. In such a scenario, a sound financial advisor can be of utmost help. You can seek advice on how much to set aside as an emergency corpus and which assets to choose for this purpose. Moreover, once your advisor helps you achieve the emergency fund goal, you can raise the bar higher to cover greater uncertain events like unemployment or unexpected early retirement.

  5. To become debt-free by constructively managing your liabilities:
  6. You can only secure your future if you have an effective plan to pay off your existing debt. Debt can be complicated and often leave you with a hefty interest burden. Hence, getting rid of debt should be a priority when creating a financial plan. You can consult a financial advisor to create a strategy to constructively manage your liabilities and become debt-free. Debt management can become complex due to the involvement of various stakeholders, rules, and processes. A qualified financial advisor can help you every step of the way to reduce your debt. Once you achieve your target, you will be in a better position to fulfill your long-term aspirations. Financial advisors consider your liabilities and, accordingly, create a personalized debt management plan. Further, you can use the expertise of an advisor to identify methods that can help you bridge the gap between your earning and expenses to eliminate the need for debt.

  7. To manage your investment and related assets for future growth and a financially stable retirement:
  8. The world of investment is rewarding but also heavily complex. The changing market dynamics, different rules, several stakeholders, etc., can make the investment process challenging. However, a sound investment plan is highly critical for your future growth and financially stable retirement. A financial advisor can help you create an investment portfolio that suits your financial goals and risk appetite while maximizing your profits that lead to better accumulation of wealth in the long-term. Advisors can create a portfolio of suitable investment options as per your life stage, monetary condition, and requirements. For example, if you are nearing the retirement age, your advisor will likely create a more conservative portfolio to preserve capital rather than maximizing profits. However, if you are young and far from retirement, the advisor may suggest an aggressive portfolio comprising more assets, like stocks and fewer bonds, to gain high returns. Further, your financial advisor can track the performance of your portfolio and suggest appropriate measures to improve returns. Also, during extremely volatile times like the COVID-19 pandemic, a financial advisor can leverage their market acumen and expertise to help you stay afloat.


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  9. To effectively plan for your retirement so you can spend your golden years comfortably:
  10. No financial plan is complete without an effective retirement strategy. It is critical to prepare for your non-working years today to be able to spend your golden years comfortably. But retirement planning is not always as straightforward as it seems. It has several intricate phases and requires a detailed understanding of various retirement savings vehicles, their advantages and drawbacks, contribution and withdrawal limits, penalties, and more. That said, a financial advisor can help you undertake this vital task with utmost precision, ensuring your retirement planning is foolproof. As a first step, your financial advisor can help you create a retirement goal and set a defined path to help you achieve the target. Financial advisors consistently map your risk tolerance with your life stage, and accordingly, alter your portfolio for retirement. The advisor will be able to guide you on which of the retirement savings options, like a traditional IRA (Individual Retirement Account), a 401(k), a Roth IRA, etc., is best suited for your needs. They can apprise you of the contribution limits, withdrawal rules, RMDs (Required Minimum Distributions), penalties, and more, for each of your retirement savings accounts. You can consult your financial advisor to understand how you can leverage your retirement accounts to reduce your tax liability, make the most of your contributions, schedule penalty-free withdrawals, and ensure that you do not outlive your retirement savings. Further, your advisor can also help you with Social Security benefits and suggest appropriate withdrawal strategies to capitalize on them. A financial advisor can assist you in securing your medical and long-term care needs. The advisor can also direct you on how to use government-sponsored health programs like Medicaid, etc.

  11. To draft a holistic estate plan without incurring hefty estate taxes:
  12. Estate planning is important for everyone who owns assets. It is not a task of the rich and is essential for everyone’s long-term security and legacy wishes. Estate planning can entail rules, estate tax implications, beneficiary rules, and so much more. Hence, it may be recommended to consult a financial advisor. Your financial advisor can aid in critical tasks like mapping assets, preparing a will, using profitable investment tools, streamlining foreign investments, and so on. Your advisor can also keep a check on the estate’s assets, help you understand how you can effectively use them when alive, and eventually pass them on to your beneficiaries without incurring hefty estate taxes. In cases where you might need to establish a trust or assign a power of attorney, your advisor can guide you through it all.

  13. To deploy tax-saving strategies and minimize your tax liability:
  14. High taxes can be detrimental to your financial standing. But irrespective of how unwanted taxes are, it is impossible to ignore them. You have to dutifully pay your due each year even if it reduces your savings and impacts your overall financial condition. However, it is possible to minimize your tax liability to ensure you only pay the least possible amount. Your financial advisor can create efficient tax strategies to lower your tax outflow. They can suggest tax-aversion tactics like charitable donations, giving gifts, setting up trusts, as well as strategies like capital gains offsetting, tax-loss harvesting, etc. The professional can also suggest various tax-deferred retirement accounts that you can invest in to save more money. Moreover, if you have received an inheritance, your advisor can work with you to reduce its tax implications. Experts suggest that a comprehensive tax plan is one of the strongest pillars of a secure financial future.

To sum it up

In all, financial planning is a continuous process, and if done well, it can reduce financial stress, fulfill your current needs and help you build a nest egg for your future. A sound financial plan is important because it helps you make the most of your assets so you can achieve your goals. A qualified and experienced professional financial advisor can help you create an infallible roadmap for your financial future, so you can make the right choice at the right time in your life.

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The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.