Many may think that financial planning is only necessary for wealthy investors with complex needs, but the reality is that a financial plan is something that can help everyone, not just the wealthy. And your workplace can help you get started.
The fact is, if you have any source of income, you are always deciding what you will do with it: — what you will spend it on (groceries, rent or mortgage, clothes), how much you will spend to save. Financial planning simply means having a well-thought-out strategy that helps you achieve long-term goals while meeting short-term needs. Many employers offer benefits that can help connect people with financial coaches, advisors, or tools to create a personalized financial plan.
Recent events have highlighted the importance of keeping up financially and preparing for the unexpected, and the stress that can result when we don’t. The Lending Tree Pandemic Money Survey found that 42% of Americans said they cried about their financial situation during the COVID-19 outbreak, but only 18% made a plan to address the problem.
Just as it is impossible to build a skyscraper without a blueprint, we all need a detailed plan to build a financial framework that addresses not only our daily needs, but also lays the foundation for the future we envision. Creating a practical and actionable financial plan is your first step.
If you can imagine it, you can do it
Morgan Stanley research found that most investors are concerned with making sure they can meet their financial needs throughout their lives, maintain or improve their standard of living, and be able to cover unexpected medical costs. But everyone also has unique priorities. What is most important to you: taking care of your loved ones, buying a home, preparing for retirement? Maybe it’s all of the above, and more. Regardless of your current financial circumstances, a financial plan can help you see new possibilities and take charge of your future by implementing new tools and behaviors.
That’s why many companies now offer financial planning support to their employees. This can take the form of financial advice, strategy building, or counseling to help you identify and move toward your financial goals. Find out if your employer offers access to a financial planning app or website, investment basics education, emergency savings matching contributions, or student debt repayment programs. Together, these workplace benefits can help open the door to a stronger financial future.
laying the foundations
Research from the Brookings Institution shows that only a third of Americans are actually financially healthy. Half are just getting by, while nearly one in five are financially vulnerable, meaning they are struggling with almost every area of their financial life.
To start taking control of your financial future, map out your entire financial picture, including all your debts (don’t forget interest rates) and sources of income. Two simple tests: Do the math to find out if you have six months of emergency savings on hand, and use a basic retirement calculator to see if you’re on track to meet your future needs. This snapshot can help highlight some of your baseline financial strengths and weaknesses.
Wherever you find yourself, one way to put yourself on more solid ground is to create a goal and then work towards it one step at a time. The key is to make your goals Specific, Measurable, Action Oriented, Realistic and Time Limited (SMART):
- Specific: You can’t achieve a goal unless you know exactly what it is. For example, instead of saying you want to “save more money,” aim for a specific amount, like $100 more per week.
- Measurable: The target should be something you can track. The goal of saving an extra $100 each week is something you can track over time.
- Action Oriented: Define what you will do to reach your goal. For example, to save an extra $100 per week, you can lower your budget to find an extra $100 each week or work as a freelancer.
- Realistic: Is your goal achievable? If saving $100 more per week is too high, you may want to adjust your goal to $50.
- Limited in time: Every financial goal should have a due date, so you know where you are in terms of your progress. When the time is up, you’ll have a clean slate to reevaluate and set a new goal.
With this type of process, you can begin to create a workable financial plan that reflects your goals and priorities. And if your workplace benefits can help you get started, you’ll be one step ahead of the game.
mapping your future
Creating a financial plan is a basic but necessary step in securing your financial future, and the support you can access through your workplace can be the difference between always striving and achieving your goals.
Whatever your financial dreams, your path to success will require patience, diligence, and careful planning. Don’t expect to reach your final destination overnight, but the sooner you become familiar with the workplace resources available to you and use them to create a thoughtful financial plan, the smoother your journey is likely to be, no matter what. whatever life throws at you.
This article has been prepared for informational purposes only. Information and data in the article were obtained from sources outside of Morgan Stanley. Morgan Stanley does not represent or warrant the accuracy or completeness of information or data from sources outside of Morgan Stanley. The strategies and/or investments discussed in this article may not be appropriate for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The suitability of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
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Head of Financial Welfare, Morgan Stanley
Krystal Barker Buissereth, CFA®, is the CEO and Chief Financial Officer of Morgan Stanley at Work. In this role, she is responsible for working with corporate clients and organizations to create, implement, and manage financial wellness programs that meet the needs of their employees.