October is Financial Planning Month, and this month we are reminded how important it is to have a financial plan and how much value financial planning technology and working with a financial advisor can provide in helping you achieve what is most important to you. According to a Hearts and Wallets survey Compared to last year, 82% of consumers are thinking about their financial goals, but only 54% have some type of plan. And of those who made plans, only 37% did so in writing.
Written financial plans are important, and consumers can leverage innovative technology to maximize every dollar they earn on the journey to achieving their goals.
For many people, competing priorities like paying off debt, building an emergency fund, and saving from their employer’s 401(k) can feel daunting or even impossible. Making the right decision about where to most effectively allocate every available dollar can be complicated. Leveraging technology and working with a financial professional can help make this process easier.
Once a plan is in place, technology platforms can offer access to dashboards that provide a view of an individual’s entire financial picture, allowing them to see and track progress toward not only retirement or dream purchases, but other financial goals as well. Like paying for a down payment, saving for healthcare costs, and more.
There are several things to consider and prioritize appropriately when considering how to maximize the impact of each dollar. Americans can determine where to put their next dollar using financial planning technology available in today’s market:
- Emergency fund. Establishing an emergency fund is an issue that every individual should put on their agenda. Consumers can use financial planning technology to create emergency funds to cover one, three, or six months of emergency expenses. Smart technology can help collect and use personal and industry data to help consumers determine how much of their income they should allocate to cover emergency expenses or cover expenses when they become unemployed.
- Credit cards. Evaluating credit card debt and deciding which debt to pay off first is another area that needs to be evaluated. Consumers can create a personalized and optimized program to help them reduce and pay off credit card debt while reducing overall interest paid.
- Health savings accounts. Certain financial planning solutions enable consumers to understand how much they need to set aside in health savings accounts (HSAs) to cover their estimated annual expenses. They can also help consumers understand the potential tax-deferred growth of their contributions over time.
- Retirement savings. Consumers can use financial planning tools to calculate how much they will need to save to reach the goals they have set for retirement. They may also see the potential impact that tapping into employer contributions or increasing personal contributions to a 401(k) can have on their savings over the long term to help them achieve a financially secure retirement.
- Student loans. Some financial planning technology applications may allow consumers to evaluate multiple student loans with different interest rates to find the best way to pay off college debt and track progress toward doing so.
- Upcoming goals. Financial planning technology can create customized monthly savings strategies to help consumers achieve their goals over the next year or next decade. These include everything from saving for a vacation to the Caribbean or Europe to buying a house or paying a child’s college tuition. By working with modern financial planning technology and/or advisors who rely on it, consumers can see how they can best allocate their paychecks and other income to achieve savings to achieve these goals and see the impact of potential budgeting changes.
Leveraging the right technology not only helps individuals address each of these financial questions, but also helps weigh decisions between competing priorities and maximize the impact of every dollar. Even a small change in the way income is allocated can have a big impact on how quickly debt is paid off or how much wealth grows.
A financial plan is much more than setting financial goals; it also involves making the most of the money Americans have to achieve these goals.
Leveraging holistic financial planning tools can make the journey towards financial goals much more efficient in the short and long term. During this year’s Financial Planning Month, consumers need to consider how to maximize the impact of every dollar.