And Why Financial Planning is Especially Important for Audit and Consulting Professionals

According to Charles Schwab’s 2019 Modern Wealth Index Survey, only 28 percent of Americans have a written financial plan.1 Most of the remaining 72% of Americans said they didn’t have enough money or time to make a plan worthwhile, or that the process was too complicated. However, those with a financial plan consistently maintain healthier saving and investing habits. Everyone can benefit from having a financial plan in place, not just the wealthy, but implementing and adhering to a financial plan is especially vital for consulting and audit professionals for several reasons.

Any good financial advisor will tell you that the first rule of successful personal finance is to have a clearly defined plan in place. This point is emphasized by Peter Mallouk, the founder and CEO of Creative Planning, in his book The Five Mistakes Every Investor Makes and How to Avoid Them. Not having a plan is mistake #1.

Peter invokes Yogi Berra’s sentiment that “If you don’t know where you are going, you’ll end up someplace else.”2 You wouldn’t provide audit findings without first conducting a thorough examination of a clients’ books and records. However, Peter advises that, “Most investors invest without an endgame laid out in advance. Without a destination, it is easy to drift off course. Without a plan, it is easy to change the strategy midstream, increasing the odds of messing everything up.”

Before you spend or invest a single dollar, you should have a plan. It doesn’t need to be a 150-page road map of how you will budget, save and invest every penny for the rest of your life. Instead, start with a plan that is simple and straightforward.

Need more incentive to begin the planning process? Consider the following. A written financial plan can:

  • Increase your financial confidence and peace of mind
  • Help you budget and meet your financial goals
  • Lead to better habits
  • Help you identify, avoid and address various risks, including investment risks, insurance risks and estate planning risks
  • Guide your risk tolerance and inform how aggressively or conservatively to invest
  • Implement a strategy for paying off student loan and other debt
  • Allow you to save adequately in an emergency fund
  • Help you set priorities and live comfortably while also planning for the future
  • Provide financial security in the case of an unexpected event
  • Help ensure you remain in compliance with your firm’s independence requirements
  • Consider any ownership interests you hold in your firm when allocating investments and determining an appropriate level of risk

Regardless of whether you have a financial plan in place, you are likely aware of the benefits. Less talked about are the ramifications of not having a written financial plan.

Ramification #1 – Coming up short on your financial goals

It is often said that failing to plan is planning to fail. By not taking time to reflect on where you are financially, where you want to be and how to get there, you are unlikely to achieve your financial goals. Planning early gives you more flexibility when life throws complications your way.

Ramification #2 – Violating your firm’s independence requirements

It’s easy to set your investments and forget about them, but working as an auditor at a Big 4 accounting firm means you must consistently reevaluate your portfolio to ensure it remains in compliance with your firm’s requirements. A financial plan that is regularly updated provides checkpoints and methods for confirming that none of your investments violate your firm’s independence requirements. Choosing an advisor who has experience working with auditors can save you a lot of time and effort along the way.

Ramification #3 – Missing an opportunity to leave a legacy

Tax and inheritance laws are increasingly complex, and the best solution for other investors may not be what’s best for you and your family. Documenting your financial priorities, such as paying for children’s education, purchasing a home, paying down debt, funding your retirement or enhancing the amount you can pass to your heirs following your death, can help you choose the right path toward achieving your long-term goals.

Ramification #4 – Taking on more risk than necessary

There is inherent risk in everything from investing, to not investing, to income streams, to the general risks of life. Many of these risks are necessary and worth taking. Others should be planned for by implementing appropriate insurance and a deliberate, diversified investment portfolio. Without a plan, however, it’s difficult to identify what risks you are taking that are necessary, which ones you shouldn’t be taking, and which ones can be mitigated through appropriate actions.

Ramification #5 – Having an investment strategy that is not aligned with your goals

A good financial plan helps you understand your current financial situation in relation to the goals you are trying to achieve. Only with this knowledge can you begin to identify an investment strategy to help you get to where you want to go. Without a plan (in other words, without knowing where you are and where you’re going), it’s impossible to build an investment strategy to achieve your specific goals.

Ramification #6 – Trying everything because you aren’t focused on the right thing

The options for where and in what to invest are endless. Do you choose mutual funds, exchange-traded funds, hedge funds, stocks, bonds, annuities, other insurance products, REITs, commodities…? The list goes on and on. Without a plan to keep you focused and on course, it’s easy to get sidetracked with the wrong investments charging high fees. A solid financial plan can help you stay the course by providing guidelines around the type of investments that are right for you as well as those you should avoid.

Having a plan is essential to building, understanding and achieving your goals. Planning can help increase your level of confidence and comfort, result in more constructive financial behavior, and help ensure you remain in compliance with the requirements of your profession and firm. Ultimately, a good financial plan puts you in control of your future.

Starting a financial plan may seem like chore, but it doesn’t have to be. If you find you’re having a hard time taking the first step, a professional advisor can help.

Big 4 Financial Freedom is a specialty practice of Creative Planning. Each of our dedicated teams specializes in working with audit and consulting professionals and includes an attorney, a CPA and a CERTIFIED FINANCIAL PLANNER™ practitioner. These experienced professionals work with clients to develop personalized financial plans that take into consideration a wide range of factors, including their current financial situation, goals for the future and any challenges they may face. If you’d like to begin the process of building your financial plan, please schedule a call.

At Creative Planning, we provide our clients with the best path to wealth accumulation, retention and transfer of assets. We believe that information and education are essential to developing and maintaining a financial plan and investment portfolio. We strive to organize and simplify life in such a way that maximizes the family’s enjoyment of their wealth now and in the future.