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The Importance of Personal and Business Financial Planning

Henry David Thoreau—the beloved American essayist known for his love of nature and simple living—once said, “Wealth is the ability to fully experience life.” This can be read in two ways, and there is certainly some truth to both. Money is a mysterious thing. By itself, it doesn’t induce happiness, but it can allow for a certain amount of peace of mind and freedom that we all crave in this life. That means doing things we love and being with those we love the most. Financial wealth by itself does not guarantee happiness or fulfillment; at the same time wealth allows you to experience things without stressing about where the next paycheck is coming from. 

Here at Sovereign CPA, we know the importance of financial planning for individuals and businesses alike. If you’re looking to find a way to make your money work for you, instead of simply working for your money, smart financial planning is essential. 

The Value of a Well-Executed Plan  

According to a recent report in August of 2020, Washington confirmed that U.S. debt has reached its highest level compared to the U.S economy. Since World War II, the debt to GDP ratio had not been as lopsided. 

The key to achieving anything in life is consistency, discipline, and, yes, planning. Planning is central to getting where we want to go and making what we have work for us. The adage says it quite well: work smarter not harder. This applies to finances as well. We might not all have overflowing bank accounts or countless investment properties, but a decent amount of equity can work well and produce effectively. It’s not all about risky investments in the stock market or throwing money at the next big thing. Working with what you have and capitalizing on what changes is a part of sound planning that works across the board. 

A plan provides you with:

  • A vision for the future
  • A path to follow 
  • Strategies for short-term and long term wealth-building 
  • Greater financial literacy and understanding 

A History of Financial Planning and Its Growing Impact

As a profession, financial planning and consulting didn’t take off until late in the 20th century. The industry has many different disciplines and approaches. It was not until 1973 that the first graduating class of financial planners was official. It was timely, as the seventies were a time of great societal change in the country. Political upheaval and the return of a years-long war had people worried about the future and volatile markets. 

When President Ronald Reagan came into office, the way people used to plan for retirement began to change as individual retirement accounts (IRAs) and 401ks grabbed a hold of how people began planning their future and went beyond the risky investment business. This began a change in the financial planning sector that led the profession to become far more client-oriented. 

Financial planning is not just for soon-to-be retirees either. People seem to have this misconception that financial planning is geared and targeted towards this demographic, but the truth is that it is never too early to begin a solid financial plan. Many education systems are seeking to give young people—as young as high school— important lessons about financial planning. 

What a Financial Planner Looks At

The art of financial planning is really about finding out what the client needs are and the best way that those needs can be met. As experienced CPAs, we know the ins and outs of the tax system and how finances work for different people depending on their lifestyles, needs, and goals. We look at a couple of aspects of your finances including:

  • Tax bracket/ income
  • Current assets 
  • Investment properties
  • Owned properties
  • Mortgage or mortgage debt
  • Current market conditions
  • Other financial obligations (i.e loans, other debts) 

We begin from the beginning and sit with our clients to discuss their particular goals including preparation and goals for certain financial events. It’s not uncommon that people become overwhelmed at the thought of something like eliminating their debt. The task may seem so insurmountable that they simply let it sit there and fail to act fast on it. We help lay out a plan that is doable and works within your ability. Whether you are looking to consolidate debt, eliminate student loan debt, refinance loans, take on business investments, big purchases, or accumulating wealth, a strategy a financial plan gives you direction and ways to work towards these goals. 

Establishing a Plan For Uncertain Times 

In just a few months, the United States economy went from a booming and growing economy to one that was riddled with uncertainty and volatility. People are watching their finances closely. There is no better time to treat your finances the way you treat everything else: with caution.  The coronavirus impacted the economy in a way that even financial experts can’t completely assess at the moment. Take the time to think about what your financial goals are and where you want to be in five years. 

Simple things like saving, setting goals, maximizing benefits from tax-advantaged plans, making investments, and reducing debt can make a world of difference to getting you to a pace of financial peace of mind. There is no one-size-fits-all plan to better wealth management, but putting in place a plan that outlines your goals is the best way to start. 

Contact Sovereign CPA, Today!

If you’re looking for some financial stability and untangling of what seems knotted up finances, we will work with you and find the plan that fits for you. Here at Sovereign CPA, we can help you sketch out what this plan looks like and provide expert advice on the market and how to maximize on your particular situation. 

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