Contribute to your 401(k) and IRA as much as possible and pick the right stocks — then you have a financial plan, right? Not so. And that type of advice leads to the misconception that investing is the be all, end all to managing your finances.

“If you think of financial planning as a journey toward financial freedom, investments would be a portion of the trip, but not the whole trip,” says Bill Taylor, vice president of financial planning at Northwestern Mutual. “Financial planning also involves things like budgeting and debt repayment, estate planning, tax planning and protecting your assets.”

In other words, it’s about your whole financial picture, not just what’s in your investment accounts. No matter your income level or life stage, financial planning is essential.

  1. PLANNING FOR GOALS

    The first thing a financial advisor should talk to you about isn’t the hot new tech stock everyone is buying; rather, the conversation should center around what your goals are.

    “A good financial planner spends time getting to know you,” Taylor says. “If you want to buy a home, travel, get married or have kids someday, that should factor into your financial plan.”

    Part of that involves navigating the inevitable tradeoffs.

    “If you don't want to give up your three lattes a day, that might mean you can’t retire at 55 or travel as much,” Taylor says. “Planning is about figuring out what you want and how you can go about getting it, given what you have.”

  2. MANAGING YOUR DEBT AND BUDGET

    Some people were just born with enough financial discipline to control their spending — but you can probably count the number of folks you know like that on one hand.

    “Financial planners help the rest of us with the process of making and sticking to a budget so that we can have money left over to save and invest,” Taylor says. The budgeting process includes coming up with a plan for how to deal with debt — something many Americans struggle with. That means recognizing that not all debt is created equal, which in turn requires different strategies to tackle each kind.

    If you want to buy a home, travel, get married or have kids someday, that should factor into your financial plan.

    “When you address debt, you want to get rid of the lousy debt as fast as possible — especially credit card debt, which has high interest rates,” Taylor says. “But your financial plan might involve slowly repaying good debt like your mortgage, which has a low interest rate, so you can leverage your money for other goals.”

  3. PROTECTING YOUR ASSETS AND INCOME

    No one wants to think about all the things that can go wrong. But if your financial plan doesn’t protect you against those what ifs, it won’t matter how great your mutual funds perform.

    “When making a financial plan you also have to look at what would happen if you were to become disabled or die,” Taylor says. “If you have a family, you want to look at life and disability insurance to ensure they’re taken care of.” Other things to consider could include property insurance, umbrella insurance as well as long-term care planning.

    To be sure, investing can contribute to helping you with these key areas of your financial life, it’s just that focusing wholly on investments could actually hinder you from reaching your bigger objectives.

    “If you don’t have someone helping you with a budget, refining your goals and helping you invest correctly, you might not achieve them,” Taylor says. “Then you’re going to have to scramble, and you might have to work later than you want or change your vision for the future.”

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