(BPT) - If you've ever consulted a financial advisor, or just searched "financial plan," you probably learned what you need: A list of your net worth (assets and liabilities), a budget, a debt management plan (if necessary) — and financial goals for the next year, five years, ten years or longer.
A financial plan may seem daunting to create, which may be one reason why more than half of Americans don't have one. And according to a financial industry veteran, a financial plan may not be the most effective or useful way to approach your finances.
Why? Because the "plan" approach is limiting, and even misleading. A financial plan can seem like a set-and-forget-it move that's static and not responsive to the constant real-life changes in your life and the economy at large.
"The industry has trained people to believe that once they have a financial plan, they're set," said Fred Martin, a CFA with over 50 years of investment experience and founder of Objective Measure, a nonprofit organization dedicated to improving financial literacy. "A plan is only a moment in time, and doesn't always have flexibility. Life changes, markets change and goals change."
Instead, what people need is a clear, repeatable process for managing their investments that can guide decisions as circumstances change.
"A plan can create a false sense of certainty and confidence," Martin said. "A process creates adaptability and a constant sense of evaluation and adjustment, allowing you to evaluate change without losing direction."
How to create a financial process
Being able to develop a process that's both workable and adaptable requires a better understanding of your money as well as how investments work. This kind of financial literacy requires an education most people are lacking, and that Objective Measure is working to address.
To help you better understand your investments and create an effective financial process, Objective Measure provides these tools and resources:
Investment Essentials is a self-paced course that teaches everyday people how the stock market works, without the jargon, hype or hidden agenda. You can learn the timeless principles that drive long-term success and gain the confidence to invest with clarity.
The Able Money App gives you a clear, personalized view of your financial health, along with expert-informed insights to help you make confident decisions. Designed for everyday earners, it brings your full financial life into one place with guidance you can trust.
Financial Insights offers blog content, newsletters and live events to help provide relevant, real-world education from some of the brightest minds in finance. This content is all curated to help you grow in confidence and capability every step of the way.
Why financial literacy matters now
In today's financial landscape — shaped by rising living costs, market volatility and growing popularity of online investing platforms — understanding the basics of investing is more important than ever. Yet many Americans never ask the questions that would help them understand whether their financial trajectory is tracking toward their goals, or if it's even in their best interest.
As you go through the education process, Martin encourages individuals to meet with their financial advisor, or evaluate one, asking three essential questions:
How am I doing? How did my investments perform last year, and what are your expectations over the next 5-7 years?
What do I own? What specifically am I invested in, and does that align with my objectives?
What is it costing me? What are total costs of my investments, including advisory fees?
"People should never feel uncomfortable asking these questions," Martin said. "A strong advisor will welcome them, because the relationship should be a partnership, with the client as the senior partner."
By asking the right questions and accessing the tools and education you need to better understand your finances and investments, you can feel more confident managing your money and responding to changing needs and goals.
Stay engaged with your financial process
Too many investors assume that their role ends once they hire a financial advisor, but it's crucial to stay involved each step of the way.
"Money management should be an ongoing conversation," Martin said. "Investors deserve to understand their goals, their investments and the costs involved. They need a process they can trust, because a plan alone is never enough."
To evaluate your investment process, or begin building a process if you don't have one, visit ObjectiveMeasure.org.
