By Brandon Guttery
A recent financial survey showed that 51% of respondents who were millennials, and 56% of respondents who were of “Generation Z”, felt that they would never meet their financial goals. According to the survey, the top six most pressing concerns of people in this generation were having adequate savings, the management of debt, sustainable employment, carrying student loan balances, buying a home, and paying rent. Indeed, 95% of respondents in both categories ranked the establishment of adequate savings as their primary concern.
Interestingly, concerns over retirement, health care costs, transportation, and budgeting were at the bottom of the top 15 most cited concerns. Clearly, when you are in your mid-20s to early 30s, the objective of retirement may not be as prominent of a concern as others that were listed in this survey. However, I found it interesting that the concern of budgeting was the 15th, and least cited financial concern in the survey.
When we are working with clients in my generation, the focal point and cornerstone of our planning work begins with budgeting. Without a solid cash management roadmap, it is very difficult to provide for any of the other 14 cited objectives within this survey.
I think the analogy of a roadmap is very fitting. Imagine that you are planning a vacation trip to another state without first looking at a map or a navigation device to plan the route in advance. Sure, it is possible to point the car west and just start driving. Eventually, you will arrive somewhere, and possibly even arrive at your chosen destination. But wouldn’t it be much more prudent to efficiently plan the route so that you could maximize the time actually spent enjoying vacation, while minimizing the time spent traveling to the destination?
This is where financial planning becomes of great importance, even to someone just starting out in life. There are always goals to achieve. Those goals will evolve over the course of your lifetime, and likewise the financial plan will become increasingly detailed. But getting started as early as possible will do much to point you in the most efficient direction for the achievement of today’s goals, and to leave you better positioned for later in life as those goals change.
The first step in the financial planning process is to understand that which is most important to the client, and then helping them to envision those goals. I need to understand why each goal is uniquely important to the client. What motivates them to feel the way that they do? We unpack those responses, and create a heat map so that we put the greatest priority in the most important areas.
The second step is taking the measurable data such as income, expenditures, debt, and the goals that we have discussed, and with that input we construct a detailed financial plan. The most critical part of such plans is the budgeting module where we recognize the income and assets with which we have to achieve goals, and allocate those resources to the stated objectives. This creates a tangible, and visual financial picture, that ultimately governs everything that we do from that point forward as it pertains to investing and risk management.
The third step is ongoing. This is where I become a financial accountability partner to the clients that I serve. A financial plan isn’t something that is constructed once and never viewed again. At least annually, we revisit the assumptions that were made, and the objectives for which we’ve planned, and we evaluate actual results against planned targets. If there is variance, then we make adjustments to the plan. This is probably the most critical part of the financial planning process, because it requires discipline and dedication.
The culture of our firm centers around fostering relationships with our clients. Anyone in our industry can place a transaction. But financial planning is much more than that. As we grow and develop relationships with our clients on increasingly deeper levels, we find ourselves with greater opportunities to leave a positive impact in their lives.
In my opinion, if we can begin that process early, by actually starting with the 15th ranked concern of the survey that I mentioned earlier, then the other 14 concerns should fall more efficiently into place. I see this every day as we engage clients with whom we have worked for over three decades, and in some cases, with the second and even the third-generation of their families. Financial planning is critical, and for those plans to be effective, they must be built upon and supported by strong relationships. The earlier we can start that process, for people in my generation, the better.
(*) Brandon T. Guttery, is a financial advisor with Keystone Financial Group in Trussville. Brandon offers products and services using the following business names: Keystone Financial Group – insurance and financial services | Ameritas Investment Company, LLC (AIC), Member FINRA / SIPC – securities and investments | Ameritas Advisory Services – investment advisory services. AIC and AAS are not affiliated with Keystone Financial Group. Information provided is gathered from sources believed to be reliable; however, we cannot guarantee their accuracy. This information should not be interpreted as a recommendation to buy or sell any security. Past performance is not an indicator of future results.