What is a financial plan and why do I need one?

If you’re investing, saving money for retirement and paying down debt, you probably feel good about your financial future. That said, even the most experienced investors can have a hard time shaking the feeling that they’re making it up as they go along. And when uncertainty strikes in the form of a market decline, job loss, or unexpected expenses, anxiety and worry are never far behind. That’s where a financial plan comes in.

A financial plan can help you align your goals with your tolerance for risk and the amount of time you have until major goals such as retirement, while giving you the adaptability to manage whatever life throws your way. Think of it like a roadmap: It can tell you where to go, along with alternative paths to take when you run into a detour or decide to take the scenic route.

To better understand the value of financial planning, Morgan Stanley Wealth Management’s Global Investment Office polled more than 1,000 respondents to understand financial planning trends among today’s investor population for our 2025 Power of Financial Planning Survey.¹

Three-quarters (76%) of respondents said they wish they had had a financial plan sooner and 66% reported feeling a lack of strong confidence in their ability to achieve long-term goals.  

Creating a financial plan as early as possible can help you feel prepared, no matter what. Here’s how to get started.

A financial plan is more than just an investment strategy. It is a personalized roadmap that can help you make decisions about financial tradeoffs and manage your money throughout your life. You’ll review your assets, such as your investment portfolio, and your liabilities, such as debt, and consider your personal goals. Those details can help you create a step-by-step plan that will map out your timeline to help you achieve your goals.

For example, your plan can help you determine how you’ll save to buy a home in a way that considers the market and interest rate environment. Or it might account for the way a career pivot or earlier retirement date may change your savings goals. You can also model what-if scenarios so you’re prepared for the things that keep you up at night, for example, inflation or loss of a family member. Modeling different scenarios can help you be more informed and confident about the decisions you make.

Like any roadmap, a financial plan can help you avoid feeling stressed. According to our research, people with a financial plan are less likely to worry about whether they are on track to meet their financial goals (36% of survey respondents) compared to people without a financial plan (47%). At the same time, respondents with a financial plan are about 10% more likely to say they are satisfied with their personal relationships, investment portfolio, life direction, and financial health.

One reason for this increased satisfaction is that a financial plan helps remove some of the worry of investing by helping you make decisions and balance trade-offs.

For example, think back to the early days of the COVID pandemic. In just one month, the market as represented by the S&P plunged about 34%. For investors who didn’t have a plan in place, the temptation to panic and sell at the market low would have been tremendous. However, investors with a financial plan in place – say, an investor who won’t need their retirement funds for decades – could rest easy, wait for the market to recover and stay on track with their long-term goals. In fact, a Morgan Stanley Global Investment Committee study of nearly 120,000 clients  using Morgan Stanley’s Goals Based Planning System during the 2020 COVID market crash found that more than three-quarters of those who were initially considered “on track” in their plan remained so, even at the market’s bottom.¹

One common misconception is that a financial plan is only for people with significant wealth. However, a financial plan isn’t about what you have. It’s about what you want to achieve. Rather than starting with a specific level of wealth, the key to success is time. Creating a financial plan sooner can give you more time to let your wealth grow, with the added flexibility for when goals change.

Starting sooner instead of starting with more is one of the biggest regrets for most investors: 76% of respondents say they wish they created a financial plan as soon as they started their career. However, only 28% of investors say they started planning when they first started working, while 68% only started thinking about a financial plan when they began saving for retirement.

While it’s never too late, it can be beneficial to start sooner, even if you don’t think you have enough assets available to warrant a plan.

Source: Morgan Stanley Wealth Management Global Investment Office, The Power of Financial Planning: A Road Map to Achieving Goals With Confidence Survey

Keep in mind that a financial plan isn’t something you create once and never touch again. It’s meant to evolve as life changes. Whether you’re buying a home, saving to pay for college or preparing for retirement, your financial plan should adjust to reflect your new goals and current circumstances.

Tracking your progress against your plan can also help you determine when it’s time to update your strategy, revise your savings targets or adjust your timeline. While more than half of respondents track their account value (83%), changes in their account balances (71%) and total net worth (62%), only 38% track their progress toward their goals. A financial plan can help you create goals and track progress so you can make the right change at the right time as needed.

Creating and managing a financial plan doesn’t have to be difficult or overwhelming. E*TRADE’s planning experience (login required) puts key tools and resources at your fingertips to help you take control of your financial future.

For investors who seek more hands-on help, a Morgan Stanley Financial Advisor can help you develop a personalized plan based on your needs and current portfolio, and then create a benchmark that helps gauge success based on your goals.

The bottom line: A financial plan is a practical tool you can use to make short-term decisions while keeping your long-term goals in focus, regardless of your circumstances and needs.

This article is based on “What Is a Financial Plan and Why Do I Need One?”, published by the Morgan Stanley Wealth Management Global Investment Office on 6/27/25 date.

Article Footnotes

¹ The Morgan Stanley Financial Plan Survey was conducted by Ipsos Public Affairs using the Knowledge Panel, the only large-scale representative panel of the adult population in the US, for which members are recruited using a probability-based, address-based sampling methodology. In order to maintain full representation of all adults, households without internet access are provided internet-enabled devices and an internet service provider (ISP). From Sept. 27 to Oct. 11, 2024, Ipsos interviewed a random sample of 1,013 respondents across the U.S. In order to qualify for this study, respondents were required to have $250,000 or more in liquid household investable assets and be between the ages of 25 and 75. Results were weighted to age by liquid household investable assets, using benchmarks from the Federal Reserve’s 2022 Survey of Consumer Finances.

CRC# 4703176 10/2025