When to Start Financial Planning (and What to Think About First)

This post was originally published on my blog.

A lot of people I talk to aren’t sure of when to start financial planning. Do you have the same question, about when you should start?

I could really sum up the entirety of this blog post with a single-word answer:

Yesterday. That was the best time to get started.

The second best time, of course, is right now.

But a lot of people feel like this is a “someday” type of task; something to do when they’re older or wealthier or, in one way or another, in a better place with their life or finances.

But wherever you’re at right now is good enough to start working on a plan for your finances and your future. That doesn’t mean you have to rush out and hire a financial planner and start going crazy in the markets.

It just means now is the time to sit down, assess where you’re at, and understand where you want to go.

Feeling Like You Should Wait? Makes Sense (But It’s Not Smart)

Most people don’t understand that’s really all it takes to do financial planning at a basic level:

Look at your financial reality right now. Determine where you want to go. Decide on action steps that will take you from Point A to Point B.

This is simple, and it can even be easy if your financial situation is equally straightforward.

But as your situation gets more complex and you have more moving parts and various factors to deal with, the planning gets harder (although the basic ideas behind what you need to do still remain pretty simple).

That being said, doing something is much better than doing nothing. The answer remains the same: start planning now.

Unfortunately, many businesses in the “financial advice” industry tend to make their profit by making you feel like you have to have some super complicated, very difficult-to-understand strategy or product. They profit off of making you feel inadequate or like you’re missing something or if you just buy X then you can have Y.

As a result, many people put off real financial planning. Many others fall for the misleading sales pitch and end up buying a product that isn’t in their best interest, because it was sold to them as a solution to all their financial concerns.

(Think things like whole life insurance for a young, high-earning professional — who would have been much better off putting all the money that went into the insurance product into a simple index fund that tracks the total stock market).

There are other problems, too. Many traditional financial planning firms only further feed into the idea that financial planning is for older, already-rich people because most of them have “asset minimums,” which means they’ll turn you away and won’t take you on as a client unless you have $500,000 or even $1 million to invest with them.

This is a huge reason why I started my own firm. I wanted to work with people who were young and had the potential to grow wealth — but weren’t there yet.

I think it’s people like this who need financial planning the most, but the industry largely disagrees with me, preferring to work with people who are already wealthy instead of supporting those who are working toward creating wealth.

The fact that someone who calls themselves a financial planner will turn you away because you don’t have a million dollars to invest with them is insane.

No wonder people usually think the right time to do financial planning is “someday” in the future.

That financial planning isn’t for them until “later,” when they feel more secure or more confident or more sure of their finances; or when they’re older and just have more money.

If you think financial planning is something you can do later — and that even if you wanted to start now no one would help you — you’re living with one of the biggest misconceptions you could have about your money.

When to Start Financial Planning Is Always “NOW”

Why is this such a big deal? Because if you’re in your 20s, 30s, or 40s, the biggest advantage you have to create wealth for yourself is time.

Time is what makes it easy to grow your net worth to the point where you can meet all your needs, reach your goals, and become financially independent.

Yes, easy. If you start when you’re young and stay on the right track through your prime saving and investing years (which are usually between now and whenever you get into your 50s or 60s), building wealth is pretty simple.

What makes it hard for most people is that they don’t start now. They put it off. They think they can wait until “later.” And then they give themselves an uphill battle to fight.

For one, time can compound financial problems. Let something go unaddressed for too long, and it can turn into a massive mess rather than a small, easy-to-fix mistake.

That’s true when you’re looking at interest on debt, or if you’re paying overly high fees for investments or products that will only grow over time. The longer you let those things sit and fester, the more it will cost you.

It’s also true when it comes to working a strategy that actually doesn’t get you to where you need to be. Rules of thumb and general guidelines are great when you start out — but over time, they can lead you extremely far off course.

A pilot trying to fly from Boston to Alaska could take off in the wrong direction if that’s what it takes to get off the ground, but has time to course-correct before landing in the right location if they adjust as soon as possible in the air.

But if they just relied on a general guess based on the fact they knew they wanted to head west, they could end up anywhere if they never incrementally tweak the navigation to get on the right course for their flight.

Time can turn little mistakes or errors at the start into massive problems down the road. But time isn’t necessarily your enemy. It’s also the secret sauce to growing wealth when you let it work for you.

Time is what makes it possible to simply put your money in an index fund and “set it and forget it,” meaning if you dollar-cost average your money into your portfolio and stay invested for 30 years, you’ll likely have enough money to be okay.

That’s pretty incredible when you think about it: you don’t need any technical know-how or special insight. Your just need to start early enough, and you’ll most likely end up with enough money to fund your life.

In fact, simply starting sooner means you can save less that someone who started later… and still end up with more money than the person who waited.

Of course, you can add complexity or sophistication to this strategy and build even more wealth. But for a basic you-will-be-okay outcome, all you need is time and a willingness to invest in low-cost, passively-managed index funds at someplace like Vanguard.

And you have to start now.

Can You Handle Your Financial Planning on Your Own?

Let’s look at the idea of DIYing your financial planning a bit more — because this might be a completely feasible option for you. If it is, there’s no reason you shouldn’t help yourself out right now!

There’s nothing wrong with being your own financial planner if:

• Your situation is straightforward and fairly simple
• You’re highly motivated
• You can hold yourself accountable to staying in action
• You’re able research answers to your questions and evaluate information to find the best solution for your situation

The key is to make sure you stay in action and seek out all the information you need to make an informed decision.

If you can do this, then start NOW. Don’t wait. You owe it to yourself — and your potential to build wealth — to move on this today.

When your situation starts getting more complex, however, even being highly motivated, intelligent, and capable might not be enough to stay on the DIY path.

You can always learn more or research things you know you don’t know… but what about your blind spots, or the things you don’t know you don’t know?

Do you know the right questions to ask in order to get the answers you need? What’s the cost of making a mistake or having something slip through the cracks? Can you properly interpret the information you find even if you knew the question to ask to get to that info?

Not Everyone Needs a Financial Planner — But It’s Worth Considering

This is where working with a financial planner starts to make more sense… and still a lot of people hold off on doing so because, again, they have a LOT of misconceptions about what financial planners do or who they work with.

Assuming all financial planners are the same, or that you have to be at a certain place (with your money, your career, your family, your investments, etc) are big mistakes to make.

My firm is one of a growing number that specializes in working with younger people who are highly motivated to do more with their money, and doesn’t require any kind of investment minimum (and while BYH does offer investment management services, it’s completely optional for all clients, not a requirement — and regardless, the financial planning aspect always comes first).

Do yourself a favor and make sure you understand the resources that are actually available to you right now instead of assuming the right time for when to start financial planning is “later” or “someday” instead of today.

Want More Advice That Goes Against the Usual Grain?

Get real-life context for practical money rules and the theory of financial advice when you subscribe and tune into Beyond Finances, the podcast from Beyond Your Hammock.