ACHIEVING financial independence is a common goal for many, but the path to reaching it often seems obscured by numerous challenges and misunderstandings. Recent government statistics reveal a concerning trend: an overwhelming 95 percent of individuals in their 30s are projected not to be financially independent — able to decide whether to work or not without compromising their desired lifestyle — by the age of 65. This statistic is alarming, especially when coupled with the fact that 90 percent of this group lacks a formal financial plan for their future.

While no strategy guarantees financial independence, proper planning significantly boosts the likelihood of reaching such a state. This is well encapsulated by a popular saying in financial planning circles: "People don't plan to fail; they fail to plan." Understanding this concept is the first step toward changing these daunting statistics and setting a course toward a more secure financial future.

Here is a closer look at the common hurdles individuals face in financial planning and strategies to overcome them:

Lack of assets and expense of service

Many individuals believe they have too little money to effectively plan for their future or that they cannot afford professional advice. Additionally, some are hesitant to pay for planning services without tangible proof that the benefits will outweigh the costs.

Financial planners need to demonstrate the value of their time and services and how this can benefit their clients. For those just starting out who may not afford formal planning, some financial planners offer creative solutions such as seminars and free or low-cost financial organizer kits.

Fear of planning

Financial planning can be daunting for both rational and irrational reasons. Some may avoid planning out of fear that it will limit their current spending. For instance, a young couple might resist discussing life insurance due to discomfort with contemplating mortality. Others fear that financial planning might reveal past mistakes or personal issues. While rational fears can often be addressed with logical explanations, irrational fears require a sensitive approach.

Fear of loss of confidentiality

Privacy concerns also deter some from engaging in financial planning. For example, an employee contemplating a career change might worry about their employer discovering their plans, or someone facing financial troubles might avoid disclosing their situation to a lender. Embarrassment over past financial missteps can also be a factor. A trustworthy financial planner should establish a rapport that helps alleviate these concerns about confidentiality.

Procrastination

Procrastination in financial planning stems from various causes. Some individuals may lack clear financial goals or feel that their objectives are unattainable. Others might be too busy or delay facing their financial reality until a major life event like death, divorce or bankruptcy forces the issue. Psychological barriers to planning or lack of understanding of financial concepts and institutions can also be impediments. Effective financial planners help clients set realistic goals and demonstrate achievable steps through clear and understandable planning methods.

Unable to find reliable adviser

Public mistrust is fueled by stories of fraudulent planners and personal experiences with inadequate advisers. Consequently, many people are reluctant to engage with financial professionals, fearing they might not act in the client's best interests. Ensuring the integrity and reliability of financial planners is crucial to overcoming this barrier and fostering trust with potential clients.

In light of these challenges, it is imperative that both the public and financial professionals commit to fostering a culture of effective financial planning. For individuals, this starts with education and a proactive attitude toward managing one's finances.

It's about breaking the cycle of procrastination and fear, and embracing the possibilities that come with well-informed financial strategies. For their part, financial planners must rise to the occasion by not only providing valuable services but also by building trust through transparency and a commitment to acting in their clients' best interests.

Ultimately, the journey toward financial independence is a personal one, but it does not have to be traveled alone. By seeking reliable advice, making informed decisions and planning ahead, individuals can dramatically improve their financial outcomes.

As we look to the future, it's clear that both personal initiative and the right guidance are key to overcoming the hurdles of financial planning. Thus, cultivating these aspects can lead to a brighter, more secure financial future for everyone.

Jeremy Jessley Tan is a registered financial planner of RFP Philippines. To learn more about financial planning, attend the 107th RFP program this May 2024. Please email info@rfp.ph or visit rfp.ph for details.