Moriah Diedrich is a demand generation specialist at NaviPlan, the financial planning technology provider of choice for more than 140,000 financial professionals.
In the coming weeks, fireworks will pepper the night skies as Americans celebrate Independence Day and the freedoms we have as U.S. citizens. Today, many Americans are struggling with a different form of independence – financial.
In the spirit of the Fourth of July, let’s explore how advisors can help their clients achieve financial independence.
Commit to the process and define it
The journey to financial independence can be lengthy and challenging due to the sacrifices people must make to get there. To make the most of this process, clients should understand both the challenges they may encounter and that financial success requires patience. Ask them, “what does financial independence look like for you?” Setting a clear definition for where they want to go and comparing it to their current financial picture will help set expectations and uncover obstacles to success. Follow this with some realistic goal setting against a timeline for their journey.
Map the journey
Growing an emergency fund or creating a budget are adequate first goals that can deepen a client’s commitment to the financial planning process. After achieving these small wins, consider debts and the detriments or values they can bring to your client’s financial lives.
For example, taking out a student loan to further one’s education can be a constructive step to securing a higher-paying job. On the other hand, things like credit card debt and large car or mortgage expenses can be financially and mentally draining. Becoming free of bad debt opens up more flexibility for investing, helping clients progress on their path to financial independence.
How can advisors navigate new realities in retirement planning?
Put your money to work
Clients with an emergency fund and a plan to reduce debt are likely ready to begin investing or to commit more money to investments. Establishing a diverse investment portfolio is key to achieving financial independence. Clients often put time and effort into accumulating money, then fail to put that money to work for them. There are numerous better alternatives to low-interest savings accounts, and many clients merely need your expertise and guidance to wade into the world of investing.
Take a hard look at lifestyle
It’s dangerously easy to get swept up in American consumerism, and many clients will struggle to stay on track with their financial plans. Help put things into context for clients by asking how a considerable expense now will impact their future. For example, would the money for a new $500 per month car payment need to come out of their retirement contributions?
Clients who can commit to living beneath their means can accomplish their goals more quickly and set the foundation for a better financial future. If your client’s current lifestyle is not comfortably affordable, it may be time to reconsider what is realistic for their financial plan.
Recommit to the plan
As noted earlier, it’s crucial that clients understand the journey to financial independence is often a substantial challenge. Annually reviewing their plan is an excellent way to evaluate progress, update goals, and reaffirm the client’s dedication to the process.
With Independence Day approaching, now is the time to open a dialogue with your clients to get them started on the path to financial independence.
Want to learn how you can use NaviPlan to help clients achieve financial independence with a breadth of planning capabilities? Click here to learn more.