I am now officially a financial planner. When I tell people I’m a financial planner, they usually say something like, “So you do investing?” Most people think that financial planning is managing people’s stock and bond investments and some think it involves selling insurance. But it’s not that at all.

It’s just like when you say you are busy and people say, “Well what do you actually do besides preach on Sunday? What could possibly keep you busy Monday through Friday?” Sometimes that makes you want to smack your forehead or curl up into a fetal position and cry out, “Why, Lord?” Doesn’t it?

That’s because you are not a preacher, you are a pastor. Your job is to shepherd the people of God into Christlikeness and preaching is just a tiny part of that. If all you did was preach, the vast majority of the people under your care would not get to where God wants them to be. Your job is so much more than just preaching. It is counseling, studying, investing in your own relationship with God so that you are in a position to lead, coordinating volunteers so that people’s needs can be met, developing discipleship programs, training small group leaders so that more people in the church can receive one-on-one care, reviewing financial statements and making decisions so that you have a place to meet and staff to meet people’s needs, etc. You know that you could add a whole lot more to that list. 

Just like preaching is only a small part of pastoring, investments are only a small part of financial planning. Let me tell you what else there is.

Financial Planning is a Process

First of all, financial planning is a process. That’s why you add the -ing because it’s an ongoing process. There is a difference between a financial plan and financial planning. Financial planning is a holistic process of recognizing what matters to you in life and figuring out how to apply your finances to help you get from where you are to where you want to be. My job as a financial planner is to help people understand and manage their finances in a way that aligns with their values and moves them towards their goals. 

One misconception I had getting into this field is that a financial planner is supposed to tell people what to do with their money. My introduction to the financial world was through Dave Ramsey, so that makes sense. However, I’ve learned that my job is not to tell people what to do. My job is to analyze people’s finances and then educate them on their various options and the consequences of each. My job is not to make decisions for people but rather empower them to make their own decisions with confidence. The process of financial planning is ongoing because life is always changing and there are always new options, priorities, and decisions to be made. 

Financial Planning Vs. A Financial Plan

Now, at my firm, we offer both financial planning and financial plans. The difference is that while financial planning is ongoing, like discipleship, a financial plan only addresses where you are at one moment in time, more like a one-time counseling session. A financial plan looks at every area of your financial life (we’ll go over them below) and fits them all together like a puzzle in order to create the personalized picture that you want for your life. 

We always start everyone with a financial plan, but then each person gets to decide what they want to do moving forward. For some, the financial plan is enough of a foundation where they can take it and do their own financial planning going forward. Others decide that they want to work with us on an ongoing basis so they have someone to keep them accountable, bounce ideas off of, and help them navigate their ever-changing life and complex financial landscape. 

The Components of Financial Planning

If it’s “so much more than investing,” what do a financial plan and financial planning entail?

Goals

It starts with your goals. Do you ever get in the car and start driving without knowing where you’re going? I know some people might, but to me that’s ludicrous. You have to start with the end in mind in order to know what steps to take to get there. Financial planning is the same. Do you want to be able to serve a poor church? Do you want to be financially independent by age 50? Those are very different goals and the same person would end up with completely different financial plans depending on which one they wanted to achieve.

Cash Flow

Getting a handle on how much money you have coming in and how much money you have going out is the foundation of a financial plan. If you don’t know how much money you have, you don’t know what you have to work with to help you achieve your goals. It’s like when you cook from a recipe. You need to make sure you have all of the ingredients on hand, otherwise, it won’t work no matter how great the recipe looks. You need to plan your meal based on the ingredients you have on hand or go out and get more ingredients! So, the first step in financial planning is checking your pantry (or your income and spending) so you have a good idea of what you have to work with.

Financial Independence/Retirement Planning

One of the most common reasons people seek professional financial help is that they are thinking about retirement. Either they are younger and want to make sure they are doing what they need to in order to be able to retire someday, or they are getting close to wanting to retire and want to know if they can afford to. Even if you never want to retire, like me, it’s important to plan for a season of life in which you may not be able to earn an income. You never know when your health will fail or you’ll need to care for a loved one full-time or something else like that. As such, retirement or financial independence planning is a very important part of a financial plan. 

Investment Planning

Finally, investments! While they aren’t everything, investments are an important part of a financial plan because they help fund your goals. How well you do your investing affects how soon you’ll have the money necessary to achieve those goals. Whether your goal is retirement, a college education, or purchasing a home, it’s important to make sure that your investments align with your needs. 

What is your time horizon; do you need the money in two years or twenty? What is your risk tolerance; how much of the stock market’s ups and downs can you stomach? How much are you actually paying for your investments and how will that affect the amount of money you end up with? Good financial planning doesn’t stick you into a one-size-fits-all investment model or product, but rather provides concrete advice based on proven principles and your own personal financial and emotional needs. 

Protection Planning

I mentioned earlier that some of us don’t want to retire and saving for retirement is more of a defensive move. Well, there are some other defensive moves that you will want to take as well. You see, it’s just as important to watch your back as it is to charge forward with your financial life. One incident could completely derail a great plan or completely wipe out all of the gains that you worked so hard for. 

That’s where insurance comes in. Insurance protects you from the things that would keep you from moving forward. It doesn’t actually move you forward financially (no one likes paying premiums when they feel they get nothing in return) but it keeps you from going backward. Some of the protection we touch on in financial plans are emergency funds, life insurance, health insurance, disability insurance, long-term care insurance, homeowners or renters insurance, auto insurance, and umbrella insurance. 

Tax Planning

Usually, optimizing your finances means minimizing your taxes. Taxes can be a major drain on your income, so every area of your financial life, from the kind of retirement account you invest in to the type of investments you have in each account to how you do your charitable giving, needs to be viewed through a lens of not just how to minimize your taxes today, but how to minimize them over your entire lifetime. 

Charitable Giving Planning

God has called us to be generous givers. Some of that giving can help us save on taxes. If charitable giving is a part of your life (as I suspect it is), then your financial plan should also address strategies for maximizing the tax benefits of the charitable giving that you already do. 

Real Estate Planning

Now we’re getting into the sections that aren’t in every financial plan because they don’t apply to everyone. However, if owning a home or rental real estate is in your future or part of your current reality, then it needs to be addressed in your financial plan. This is especially important for pastors because you are eligible for the clergy housing allowance, which can save you a lot in taxes. Because of the expertise I’ve developed with this blog, I get brought in on every financial plan our firm writes for a pastor to ensure that they are optimizing their housing allowance and not leaving any money on the table. 

Education Planning

If you have kids that you want to send to college (or you want to go yourself), that needs to be a part of your financial plan. How much should you save? Where should you save it? Is there anything else you can do to avoid student loan debt? Those are all questions that financial planning should address. 

Debt Planning

Speaking of student debt, what do you do once you have it? With so many different repayment plans available, there are financial planners out there who specialize in working specifically with student loans. Your financial plan should include a plan for when and how your debt (of all kinds) will be paid based on your personal financial situation and priorities.

Estate Planning

Estate planning is a topic that needs to be addressed in a financial plan though the bulk of it belongs to lawyers. Financial planners cannot write wills or other estate planning documents, but it’s our job to help you see the importance of having those documents in place and making sure all of the beneficiary designations on your various accounts actually align with your final wishes. 

I just listed eleven areas of financial planning. And that’s not all there is! If you’re planning a large purchase, like a car, that should be included in your financial plan. If you have a special needs child, caring for them should be included in your financial plan. Parents that you’re responsible for? That needs to be in your plan as well. The above areas are the most common to each plan, but the areas that a plan addresses are as varied and countless as the people they are written for. 

I hope this gives you a clearer picture of what financial planning is. Don’t feel bad if you didn’t know before. Most people don’t know because it’s such a new profession. It was birthed out of insurance sales and stock brokering, so it isn’t any wonder most people think it’s all about investments and life insurance. Let me tell you, if that’s what it was, I wouldn’t be doing it. 

While financial planning does deal with numbers, the true focus is the client as a person with a specific and unique call of God on his or her life, and the numbers are simply a means to an end. In fact, I have heard it said on more than one occasion that financial planning is like secular pastoring. (Though at my firm we don’t keep it secular!)

Come back in two weeks to hear about how financial planning applies specifically to pastors and some of the strategies we use at my firm.

If this article has made you curious about the firm I work for and our approach to financial planning, check out our website. Schedule a free introductory phone call if you think you’re ready to do your own financial planning with us.