The terms “Financial Planning” and “Retirement Planning” often get used interchangeably. Most people assume these two things are the same, but there are often some MAJOR differences. In this blog, we are going to focus on the key differences between proactive financial planning early in your career and retirement planning later in life.
These can be boiled down into 4 key differences:
Time is THE key factor when it comes to your finances. When you start the planning process early in your career (let’s say somewhere around age 30 or earlier), you have an enormous amount of time to positively (or negatively) impact your financial situation.
Compare that to someone who is approaching retirement in the next few years.
This is why it is so critical to have a plan in place TODAY. You don’t want to be the pre-retiree who is full of regret because they “could have done X” or “should have done Y”. Having financial issues early on in your career is not a major issue (in fact, it is expected). The issue is when you kick the can down the road and do not proactively address your financial situation.
Investing for something that is 30 to 40 years down the road is VERY different than investing for something you need in the next few years. We know that over long periods of time, the stock market has been a great place for wealth accumulation. We also know that in the short term, it can get quite ugly.
There are 2 questions you have to continuously ask yourself about your investments:
If the answer to number 1 is retirement income and the answer to number 2 is within 5 years, your investment strategy gets quite complex. You need to try and balance investment growth with current income and do your best to not outlive your money.
What if the answer to number 1 was still retirement and the answer to number 2 was 35 years? We are now having a completely different conversation. That portfolio is in full blown growth mode and the entire discussion centers around how much money to invest (as opposed to dwelling on what to invest in). If you start early enough and put an optimal strategy together, the conversation in retirement becomes much more enjoyable.
The difficulties you face surrounding your money as a young professional are vastly different than those of someone preparing for retirement.
Let’s compare:
Proactive Financial Planning Concerns:
Retirement Planning Concerns:
Other than the fact that we are talking about financial topics, there are very few similarities between those two situations.
Time to discuss the elephant in the room…Not everyone thinks of retirement as their primary goal!
This makes the terms “Financial Planning” and “Retirement Planning” laughably different. For a lot of young professionals, the idea of climbing the corporate ladder, hoarding cash for some date in the future, and delaying gratification for a lifetime sounds terrible!
You may have financial goals that look more like this:
Those goals may have absolutely nothing to do with retirement. They are more likely aligned with your hobbies, interests, passions, or values. Retirement isn’t for everyone, and that is more than ok.
Using the terms “Financial Planning” and “Retirement Planning” interchangeably can be a real source of confusion. Commingling these terms often leads to some unfortunate assumptions:
Ask yourself a few questions when you think about your finances.
Schedule a complimentary 15 minute intro call and see if your situation matches our expertise.
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