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Myths of Financial Planning

Whether you intentionally think about it or not, you are making financial decisions daily. You earn money, you spend money (and hopefully you save some money, too). Making choices about your finances can be easy on a day-to-day scale, but we all need to consider the long-term. Thinking about your financial future can be intimidating and can leave you with a more questions than answers.

To debunk some of the myths of financial planning, BN360, the young professional development and engagement program of the Buffalo Niagara Partnership, teamed up with Alliance Advisory Group.

Myth 1: You should pay down all of your debt instead of saving.

Should you pay debt first? Or save? The answer is save! Look at the big picture. Student loan debt is something that many young professionals deal with. But it’s not necessarily bad debt. You should have a plan to pay off student loan debt in the most efficient way possible, but you should also have a plan to save money and make sure you’re not leaving yourself vulnerable in other areas. For example, having credit card debt is a symptom of a bigger issue caused by lack of planning and savings.

Myth 2: You need to earn “X” number of dollars before you consult a financial planner.

When it comes to income, Alliance Advisory Group works with clients in various situations. The best time to start planning for tomorrow is today. “Tomorrow” means different things to different people. It could mean saving for a house, paying down debt, retiring, being protected, leaving a legacy, and a lot more. It’s important that you learn little tricks to make sure you are being efficient and effective with your cash flow/paycheck.

Myth 3: I need to find the financial planner who has all the answers

The truth is, there is no silver bullet when it comes to finances. There is no single product that solves all of life’s challenges. If there was, we would all own it and there wouldn’t be much of a reason to read this article. Just as it is the job of a contractor to use the right tools when building a house, it is the job of a financial planner to understand the proper application of different financial tools and products. The best advisor for each of us is the one who communicates clearly, takes time to understand our goals and, perhaps most importantly, proves themselves trustworthy.

Myth 4: Rate of Return vs. Rate of Savings

Conventional wisdom says that in order to achieve a high reward on your money, you have to accept high levels of risk. But that’s fiction! The truth is that achieving a high overall reward on your money is possible while taking minimal risks. Here’s how.

  • Become a world-class saver by setting aside 15-20% of your gross income.
  • Accumulate one year of annual household income in accounts you can easily access if necessary.
  • Protect yourself and your cash flows against life events that could wipe out the money you’ve already saved and hamper your ability to save more.
  • Become more efficient by lowering taxes and other expenses that can erode your savings and investment returns.

Myth 5: There is some magical number we must save for retirement

This is a question we come up against quite often: “How much do I really need in retirement?” We answer this question by asking some questions: How long do you plan on living for? What will Social Security provide when you decide to retire? What will your future health care needs be? What will interest rates be when you retire?

Most of the questions would require a crystal ball to answer, and there are no easy answers. But I think most of us can agree that, when it comes to our retirement, we would like to have “as much as possible.” This leads us to the true answer. Planning for the future is not all about how much we will need or when we will need it. It is more about developing sound habits to protect our future, save for it, and plan for it. This is where a financial planner or coach can help you develop a plan of action.

BN360 is the young professional and engagement program of the Buffalo Niagara Partnership. This content was produced in collaboration between Buffalo Rising and the Buffalo Niagara Partnership. The facts and opinions published in Buffalo Rising express solely the thoughts and opinions of our respective authors.

Learn more about BN360 and find out how you can get involved here. BN360 is presented by Alliance Advisory Group.

Lead image: Photo by Nik MacMillan

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Written by BN360

BN360

Presented by Alliance Advisory Group, BN360 is the region’s premier young professionals program. Through a variety of programs and events, BN360 focuses on the tenets of: connect, develop, and empower—creating an inclusive and collaborative network of resources that can empower talented individuals to achieve their goals for professional growth and success. BN360 is a program of the Buffalo Niagara Partnership.

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