What Does Financial Planning Really Mean?

When you go to the car dealer to buy a car, you almost inevitably drive away with a big tangible reminder of what you just exchanged a lump sum of money for. The same thing when you go to the mall, get a haircut, buy groceries, the list goes on. Whatever it is, there is a tangible reminder of exactly what you purchased with your hard-earned money.

Unfortunately, when it comes to financial planning the proverbial car usually doesn’t exist. Most individuals that engage a wealth advisor don’t walk out of the advisor’s office with anything other than a few pieces of paper. There is, in fact, rarely anything you can see, touch, or feel when it comes to financial planning.

That, however, doesn’t mean there isn’t value to financial planning.

Defining Financial Planning

You may already have a vague idea of what financial planning means in your head. Wikipedia defines financial planning as “a comprehensive evaluation of an individual’s current pay and future financial state by using current known variables to predict future income, asset values and withdrawal plans.” This definition while technically correct is almost unbearable to read—even for a financial advisor.

At BerganKDV, we aim to define financial planning more simply. It is the orderly process of creating a plan to deal with life’s inherent tradeoffs in an effort to maximize happiness. Notice there is no mention of retirement, insurance, investments, or tax. Financial planning is not about picking the right stocks or bonds. Rather it’s about recognizing that in life we have two primary finite resources—time and money—and determining how to best maximize them is the ultimate goal.

Life is Full of Endless Tradeoffs

The financial planning process is about first defining what we value in life. Is it travel? Is it time with family and friends? Is it things or experiences? What is it that is truly valuable to us? Clearly articulating what’s important creates a lens to evaluate all future financial decisions.

No matter how hard we try to stretch a dollar by budgeting, saving, and investing properly, money will always remain limited. With limited resources comes difficult decisions around how to best align our money with what we hope to get out of life and what we value most in it.

Take an example where a couple is over halfway through their careers and starting to think about the next stage in life, retirement. Their shared retirement goal is to own an oceanside villa in a warm, beachy climate and enjoy the fruits of their labor in peace but haven’t taken much time to evaluate the costs of how to get there. Additionally, they are still assisting their daughter through college as best they can and have some costly payments upcoming that may decrease their ability to save adequately for a retirement date they desire.

What do they do?

Financial Planning is Both Art and Science

The couple’s dilemma is a perfect example of the art and science of financial planning. In an ideal world, the couple would have the extra cash each month and could afford to contribute the max amount feasible toward their retirement dream. Unfortunately, we don’t live in a perfect world, and this is where planning becomes more art, less science.

The science says to have the couple’s daughter take on more student loans to minimize their costs down so that the two can save as much as they can for retirement. However, this couple wants to keep student loans to a minimum since they both have experienced significant debt before and don’t want to pass the burden to their daughter. Enter the art of financial planning. This situation involves tradeoffs based largely on personal preference, comfort, and background. The financial planning process is designed to uncover these preferences, to understand that background perspective and to create a plan that will balance both the science, art, and complexity of people’s financial lives.

Financial Planning is a Means to an End

Nobody wakes up in the morning craving financial planning. As much as wealth advisors would love to compete with the morning craving for a sprinkled donut or a Starbucks coffee, we never will. And that’s okay. Financial planning is not the end, but rather a means to an end and this is precisely why the art of financial planning matters.

If financial planning—and life—was just a big game about maximizing every penny spent with complete disregard for the tradeoffs that might occur because of that mindset then financial planning would simply require a couple of button clicks. An algorithm would spit out exactly what anyone should do in a financial situation.

It is after all not just about maximizing money. Rather it’s about generating the highest Return on Life or ROL. This is why, even if the science says to cut down your most costly payments by utilizing student loans if the art says it will cause unavoidable stress or guilt, then it’s okay to develop a plan that balances both the science and the art.  A good financial planner helps individuals weigh the pros and cons of every financial decision clearly, yet succinctly.

The Value of Financial Planning

Financial planning—and more importantly a good financial planner—does not make difficult choices surrounding the many tradeoffs in life go away. Rather the process helps to provide a framework for answering those difficult questions and navigating the financial complexity that oftentimes comes with those decisions—and ultimately the implications of those decisions.

Unfortunately, the value of financial planning will never be as tangible as the car that you can touch, feel, and even smell. The confidence that can come with going through a systematic process of evaluating what’s important, determining where you want to go in life, then building a plan to navigate the complexities of an individual’s financial life to get there, is invaluable. Ultimately financial planning is a means to arriving at an end—your best life—while providing peace of mind and confidence along the way.

At BerganKDV, our advisors work collaboratively with clients to design plans that are comprehensive and flexible so that their financial goals can be achieved, no matter what life events come their way. Want to learn more about our Wealth Management solutions? Let’s have a conversation.


Diversification and asset allocation do not ensure a profit or guarantee against loss.

The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

The views expressed are those of BerganKDV Wealth Management. They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. Investment advisory services and fee-based planning offered through BerganKDV Wealth Management, an SEC Registered Investment Advisor.

CATEGORIES: Wealth Management
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