Why It’s Important for Young Families to have a Financial Plan

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You wouldn’t sail without a compass or wander through the wilderness without a map. Why then do so many young families start out their adult lives without having consulted a financial planner?

According to a PNC Bank survey last fall, 20-somethings will go anywhere, but to a financial planner to come up with their financial plan. Only 4% of families in their early 20’s consult a financial professional. Families in their late 20’s are over three times more likely to consult the internet than a financial advisor.

Since a large population of families seek the advice of the internet for their financial planning, I figured I’d bring the financial planner to the internet. Today’s interview is with Jeff Rose. Jeff Rose, CFP® offers 401k plan reviews and Illinois term life insurance. He loves Crossfit workouts, writes about personal financial planning and craves In-N-Out burger. You can find him at Good Financial Cents and Soldier of Finance or follow his updates on Twitter: @jjeffrose.

(Me)  Financial surveys have shown that families with spouses in their late 20s are three times more likely to consult the internet than a financial advisor.  Why don’t young families look for professional financial help?  How can families benefit from meeting with a professional?

(Jeff) That statistic is right on.  I actually emailed my own readers to see how many had financial advisors and the results were staggering.  Only about one-third had actually sought the help of a financial professional.  Why I don’t know for sure, I can only assume that most young couples don’t seek financial counseling because they feel that they don’t have enough or they can’t afford it. 

Unfortunately in some cases that might be the case depending on whom you go to, but there are plenty of fee-only planners that are willing to work with young couples to get them going.  As far as how could they benefit, essentially the biggest benefit is making sure that they implement the right strategies from the beginning.  Often times I see people that they’ll try it on their own and then realize after several years that they’ve made some pretty big mistakes.  A lot of these mistakes can be avoided if they had sought the guidance of a financial professional.

(Me) How have challenges for young families changed over the last few years and in what ways are they still the same?

(Jeff) I think many of the big challenges that young couples face are trying to keep up with their peers.  Even to this day I still see young couples convincing themselves that they need the bigger house, they need the new cars, they need new clothes.  There is a certain level of entitlement that I see amongst many young couples that they’re not willing to sacrifice a little now for a benefit down the road.

(Me) Could you list in order of importance three financial issues that the average young family is dealing with?

(a)     How to prioritize their savings.
(b)     If and where they should invest.
(c)     How to earn more.

(Me) What steps can families take to begin dealing with these issues?

(Jeff) No matter what age you’re at you have to have a plan.  No matter what age you’re at you have to have some sort of plan of attack.  Many couples go to their jobs, get a paycheck and put that paycheck into their checking account with no plan of where that money needs to go.  You have to have some type of prioritization to where that money goes whether it’s 5%, 10% or 15% to go into some sort of a savings account and/or investment or retirement account.  If you don’t have that planned out from the beginning, then you’ll consistently lose track of where your money is truly going.

(Me) What are some money lessons that the average family doesn’t know that they should know?

(Jeff) It doesn’t take a lot to get going.  You don’t have to be rich to get rich.  I talked to many young couples that don’t start investing because they don’t think they have enough.  If they’d only realized that $25 a month, $50 a month, $100 a month equates to hundreds of thousands of dollars at retirement time, I think it would have a valuable impact on them getting started.

(Me) Anything you would like to add?

(Jeff) When my wife and I first started out, our biggest struggle was having an emergency fund.  Had it none been for my deployment to Iraq we were a long ways away from having that account set up.  Luckily, having to plan for uncertainty required us to have that plan of attack that I strongly suggest.  Our first target number was $5000.  That was our safe number that we had in our emergency fund.  Once we reached that safe number, we felt very confident where we were at financially and gave us the freedom to live life much more comfortably.

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