Is it Ever “Too Early” For Financial Planning?

Andrew Harvey, AIF®, CPFA™
Financial Advisor
Opus 111 Group

For those of you on a tight schedule, rest assured that this blog post adheres to Betteridge’s Law of Headlines, which states: “Any headline that ends in a question mark can be answered by the word ‘no.’” Well, now that’s settled.

For the sake of argument, though, let’s take a few minutes to explain our rationale for why establishing a financial plan is critical to the strategy of long-term creation of wealth. Wealth that will enable younger workers to achieve the “work-optional” lifestyle that is so desirable for all of us.

Why Would a 22-Year-Old Need a Financial Plan?

It may be a stereotype, but the idea of the fresh college graduate stumbling out and into the working world and wondering “Now what?” hardly seems like a new phenomenon. A Forbes article from February 2021 found that only 3 in 10 college students feel confident about attaining their preferred job upon graduation—and even fewer were confident about getting their desired salary.

That article attributes much of the uncertainty to the COVID-19 pandemic. While the coronavirus played a role, I suspect many reading this article—whether they graduated last year or 30 years ago—may recall having felt something similar.

It’s not surprising. College was seen as a symbolic “finish line” for the entirety of our childhoods. Once you cross that finish line, it can be intimidating to realize you rolled straight into a new race that has significantly fewer guideposts. Graduation, for some, can feel like running out of a hallway into a meadow, with no idea what lies over the horizon or how to get there.

The one thing a young graduate can be sure of is that their career path is unlikely to look like they had conceived when they were a student. I’m sure many of our readers who are near or in retirement can agree that life is full of surprises. I was hired immediately after graduation as a bouncer, then became a bartender, a sportswriter, a broadcaster and a communications manager before pivoting to the financial world several years ago. I love this job: not only is the work much more fulfilling than bouncing, but I’ve also enjoyed a 93% reduction in the number of people who try to punch me in the face during my workday.

What Are We Aiming At?

Imagine a bigwig going to NASA’s office and pointing at a rocket in the hangar.

“I want to send that rocket to space,” says the bigwig.

“Sure thing, sir,” answers the technician. “What are we aiming at?”

“Financial security,” is a big, nebulous concept just like how space is mostly a vacuum. With a clear goal, it’s possible to start solving for how to get from point A to point B. Without one, you can’t be sure you’ll wind up where you really want to, even if you make it off the launch pad.

A financial plan won’t make a young person’s career choices for them, but it can help identify key values around their life and money that will benefit them tremendously as they look to the future. At Opus 111 Group, we create a financial plan with every new client we welcome to our practice, including those participating in our SYFI (Secure Your Financial Independence) Program for younger investors. As a critical part of that experience, we take the time to identify their key values around money and the role they want money to play in their life. This clarity allows the identification of critical financial goals and milestones much easier. Once you know what you’re aiming at, you can start to solve for how to hit that target.

Someone just emerging from college or trade school may have no idea what they want to do for work, but they may be certain that they want to buy a house one day or start a family. Having these goals in mind makes it easier for someone to rationalize making smart choices around saving and investing money. You’re no longer being asked to squirrel away funds for some inscrutable goal, you’re saving money for that house.

Having Financial Goals Corresponds to Having Good Financial Habits

This piece from Charles Schwab lists a few key data points from a 2021 survey where they discovered that, among other things, people with financial plans tended to have healthier financial habits. In short, they found that compared to those without a plan, 65% of planners had an emergency fund (compared to 33%), 71% were aware of their investment fees and costs (45%), 87% regularly rebalanced their portfolio (63%) and 47% never carry a credit card balance, make their payments on time, or have no debt (29%).

These data don’t show us whether these facts are causative or correlative in nature. Someone who goes through the planning process may already be inclined to be mindful about their money. They do, however, show that people who choose to create a financial plan tend to make smarter, more informed decisions around their finances.

Investing is a habit. Just like diet, exercise, and flossing your teeth, the earlier in life you establish those habits, the smoother the overall ride will be. You can still get to those goals later in life if you don’t establish those habits early, but you’ll have extra work to do on the back end (the government even explicitly acknowledges this by allowing those over Age 50 to contribute extra money to their retirement account, officially referring to them as “Catch-Up Contributions”).

The otherwise-forgettable 2012 film Killing Them Softly has a terrific ending scene, punctuated by Brad Pitt’s straightforward line “I’m living in America, and in America you’re on your own.” This is the financial and philosophical reality that many young people will face after the guideposts and expectations of the educational system fall away. Parents can provide guidance and (for those able) assistance to help their children pursue their dreams, but deep down we all know that they must make their own choices about their future.

No one can tell young people exactly how their path will shake out, but the planning process can absolutely help them start to decide where they want to go. For those older than recent graduates, I simply offer the old saying: “The best time to start was yesterday. The second-best time is today.”

If you or someone you know could benefit from achieving clarity about your financial goals and want to start to understand how to get from here to there, please reach out to me or a member of my team. We’d be honored to help.

Andrew Harvey, AIF®, CPFA™ is a Financial Advisor at Seattle-based Opus 111 Group. He created Opus 111 Group’s SYFI (Secure Your Financial Independence) Program for young investors in 2022 and works in Opus’ Retirement Plan Consulting division. In his spare time, he plays the Irish sports of hurling and Gaelic football for USGAA side Tacoma Rangers. Andrew lives in Kent, Washington with his wife Lauren and their cat, Bella.