A Plan Can Make All the Difference!

1 Northwestern Mutual, Planning and Progress Study, April 2012

There is a distinct difference

between a neighborhood

baseball game and a major

league playoff. It’s not just

uniforms and ceremony; it’s

the level of skill exhibited.

The difference between

informal financial planning

and professional financial

planning is similar. Informal

planners often have a

general idea about their

goals and how to meet

them, but have no definitive

plan. Formal financial plans align financial goals with specific actions. Research shows

that almost one-half of Americans take an informal approach to financial planning. That

may be why the majority say their planning needs improvement.1

WHAT IS FINANCIAL PLANNING?

Financial planning is a process designed to help individuals, families and businesses

reach their financial goals. A comprehensive financial plan addresses issues such as

making major purchases, saving for college, minimizing taxes, preparing for retirement,

creating an estate plan, managing risk and much more. Generally, planning involves

seven steps:

WHY IS PLANNING IMPORTANT?

Financial planning can help you identify and manage risks. For example, most Americans

will eventually need long-term care — help with basic daily activities such as bathing,

eating, dressing and housework. Rather than have financial plans in place to address

these needs, many Americans hope that family members, friends and/or neighbors will

provide the care needed. Financial planning is important because it helps determine

where you are today, where you would like to be in the future and how to get there. It

also identifies strategies for managing any risks you may face along the way. If you don’t

have a formal financial plan, let’s discuss building one.

MAY 2012

Why Don’t Americans Plan?

A recent study found that Americans don’t have comprehensive financial plans because they:1

1. Establishing financial goals

2. Gathering relevant information

3. Evaluating the information

4. Developing plans for achieving

goals and protecting against risks

5. Implementing the plan

6. Monitoring the plan

7. Making appropriate modifications

consistent with established goals

and risk mitigationDon’t have

enough time

Find planning

too confusing

Don’t have

enough interest

Are unable to

find the right help

33%

28%

21%

18%

When it comes to your

financial future, the price you

pay for a mistake can be

steep. Learn from other

individuals’ blunders and

avoid these three common

investment errors:

1. Trusting your instincts. When it comes to investing, trustingour instincts isn’t a very good idea. We tend to buy when wefeel confident — often, that’s when the market has been doingwell and investment prices are high. On the flip side, we tendto sell when we are afraid of losing money — usually, that’safter a market downturn when prices have dropped. A soundalternative is to choose an asset allocation strategy that alignswith your financial goals and make changes when major lifeevents require it or when your goals change.

2. Being too conservative. It may be the result of recent marketvolatility or tough economic times, but 40 percent ofAmericans currently prefer “safer” investments that offer lower

returns and lower risk.2 If you are one of them, it’s important toremember that “safer” investments are not risk-free and aninvestment with a low return may not help your investmentsgrow enough to stay ahead of rising prices, which can make itmore difficult to afford goods you buy every day.

3. Ignoring your portfolio. As the markets move up and down,the value of your portfolio will, too. As a result, it’s important torebalance every year or so, to make sure your assets areallocated in the way you intended. If your portfolio becomes tooconservative, you may not reach your goals. If it becomes tooaggressive, it may fluctuate in value more than you can tolerate.Through rebalancing the allocation is returned to its originalcomposition and realigned to your investment strategy.

PERSPECTIVE | MAY 2012 2

© 2012, Lincoln Investment Planning, Inc. • Registered Investment Advisor • Broker/Dealer Member FINRA/SIPC • 218 Glenside Avenue, Wyncote PA 19095 • www.lincolninvestment.com P137_05/12

Avoid CommonInvestmentMistakes

2 Northwestern Mutual, Planning and Progress Study, April 2012

1 gallon whole milk $2.48 $3.58

½ gallon ice cream $2.65 $5.29

1 pound cheddar cheese $3.38 $5.71

Inflation can have a significant effect on prices over time.

Source: University of Wisconsin Dairy Marketing and Risk Management Program

Cost 1995 2012