Busting the Biggest Financial Planning Myths

*This article was originally published on February 6, 2019. It has been updated for 2020.

The world of financial planning is rife with misconceptions. For some, creating a budget might appear to be just a pipe dream as they get by paycheck to paycheck. Investments may seem so mysterious or difficult to understand that many simply don’t invest. And financial independence can also feel like it’s out of reach — eons away, even — deterring others from even beginning to prepare.

But for most folks, retirement is only a couple short decades down the road. Creating and maintaining a budget can mean the difference between getting ahead financially and continuing to live by the payday cycle or experiencing debt. Investments could help them reach their goals more quickly, rather than leave them striving for their hopes and dreams longer than necessary.

And planning is the thread that can sew all these money issues up into a manageable financial road map.

Isn’t it time we brought some clarity to the world of financial planning? Read on to learn some of the biggest myths out there about the process — and the truth behind the misconceptions.

Financial planning myth-busting

Myth 1: “You have to be rich to work with a financial planner.”

Financial planners help clients of all financial statuses and with all financial backgrounds. Whether you want a plan for getting out of debt, saving for a home or college for the kids, or just want to grow your savings so you can retire comfortably, if you have a goal, planning can help.

One thing to keep in mind is that — even though financial planning could be beneficial for everyone — not all financial planners will accept just any client. Some work with clients in specific niches, which can vary widely: Some advisors only work with clients who are high-net-worth individuals. Others specialize in those who work in certain industries or for certain companies. Still others base their practices on helping clients plan how they’ll pay off student loans or mortgages.

So keep in mind that you don’t have to be wealthy to work with a financial planner. And as you search for the perfect planner to partner with, look for someone who has helped people in situations similar to yours achieve their goals.

Bottom line: You don’t have to be rich to work with a financial planner. Everyone starts somewhere. And with advisors offering a variety of service models at varying price points, focus on finding a planner who understands and is suited to your specific situation.

Myth 2: “Financial planning is for baby boomers — not Gen X-ers and millennials or Gen Z.”

Just as you don’t have to have a certain amount of money, you also don’t have to be of a certain age to benefit from financial planning. In fact, the older members of Generation Z are college-age now, and some at the top of the age range have even graduated from post-secondary institutions already. With high college costs, those who took student loans could use financial planning as much as those in Gen X and Y dealing with similar situations. Many of those same X, Y, and Z-ers are or may soon be saving to send their Generation Alpha children to college.

But enough about college — other major life changes that require major finances are happening for those younger than boomers. And while boomers could likely use a financial planning hand to buy that second home or go on the retirement vacation of a lifetime, older members of Generation X are now nearing retirement age. Others in Generations X, Y, and Z face the challenge of saving up to put down payments on homes, upgrade vehicles, or take their own much-needed vacations.

Whether it’s putting money away for retirement or working hard to reach goals along the way,  the right plan could help you achieve them more quickly.

Bottom line: Everyone stands to benefit from financial planning — no matter their age.

Myth 3: “I’m not going to retire, so I don’t need financial planning,” or “My retirement years are a long, long way off, so I don’t need to start planning yet.”

Even if you love your job and never want to retire, it’s still smart to plan for the future, both in the near term and the long run. Forget about retirement and think more financial independence. Once you’ve reached it, you can work all you want — but you’ll know that you don’t have to.

Also, consider that a person who works for his or her whole life could build up quite a bit of wealth and may want a hand managing it and making a plan for spending it down in retirement or gifting assets when he or she passes. Someone who wants to work forever might have goals other than retirement to plan for and work toward. On the other hand, a serious health issue or disabling injury could make retirement an unfortunate necessity and reality for a person who doesn’t want to ever stop working. A financial plan is a tool everyone — even today’s “non-retirees” — can use to plan for the worst as they hope for the best.

And for those who don’t think they need to plan yet, a reminder: Starting to save for retirement earlier means you can enjoy earning a return on the return you earned in previous years, allowing you to reach your goals more quickly. I’ve said it before and I’ll say it again, compounding return is a beautiful thing.

Bottom line: Financial planning is about a lot more than retirement, so having a plan can even help those who plan to work their whole lives. Start early to enjoy more compounding returns.

Myth 4: “I’m saving plenty of money for retirement, so I don’t need a plan. I’ll figure it out as I go.”

One serious issue those who don’t plan can face is outliving their retirement funds. Without a plan, a retired person who had gotten used to a certain standard of living could suddenly face a major shift if he or she were to run out of money.

Imagine what that could mean for someone who had been saving for a comfortable future, thinking that he or she would be set for life!  … but who maybe didn’t save enough.

And many people aren’t actually saving enough for retirement. Take members of generations X and Y, for example. Millennials under 35 have saved, on average, $32,500 for retirement while Gen-Xers have an average of $100,100. While those numbers might sound impressive, they’re only averages. To put things in perspective, when it comes to the median — the middle number in a list of numbers in order — Millennials come in at only $12,300 and Gen-Xers at $37,000. That means members of both demographics who have saved megabucks for retirement are pulling their relative averages up while many members of each generation are closer to — or below — those median numbers.

But that’s exactly where financial planning could help. In fact, working with an advisor can improve outcomes by as much as 1.5% to 3.75% per year. So, even if you think you’re saving enough, a planner could help you make your much-needed plan, estimate your retirement length to ensure your savings goals are realistic so you won’t run out of money early, and even amplify the amount you have saved over time.

Bottom line: A plan can help you prepare for whatever might come your way, so it’s even more important for spontaneous types to prepare savings for any possibility.

So, did you believe any of these myths?

The most important thing to keep in mind is that everyone could benefit from a financial plan suited to his or her life. Neither net worth nor age is a barrier to creating a plan, and that plan could help with just about any situation you encounter on the path to financial freedom.