Importance of Financial Planning
If you are still thinking that financial planning is only for those with wealth then you are greatly mistaken. Everyone needs financial planning.
Your level of income has nothing to with whether you should be having a financial plan or not. Anyone can greatly benefit from a good financial plan regardless of your income level.
A financial plan is always seen as a great invaluable tool that everyone should have. Below are some reasons why you need to have a financial plan.
- Setting goals
As said before, financial planning is for everyone. Even for those considering themselves to be wealthy, it is a necessary measure that helps in setting goals and strategize on how you can increase the wealth you have.
The goals to be set should be thoroughly thought out and laid down for all your life stages. This is something that you should start thinking about as early as possible and not when you are about to retire.
Goals to be planed for include, having children, their college fee, buying a home, early retirement among other things. Whatever your goals might be, you need a financial plan as it will help you achieve them one by one effectively.
- Creating realistic timeline
Well, once your plans are laid down and the goals are set, you will need to have a timeline that you want to achieve all that in.
Well, we all know that Rome was not built in a day and so are your plans, you cannot achieve them all in a short period of time.
Your planner should help you to create a timeline that is realistic in order to see all your goals achieved.
They will look at all aspects when it comes to your finances and calculate a timeframe that is reasonable enough for you to meet your goals.
- Watch your spending
For you to reach all the goals you had set, you will need also to keep an eye on your spending.
This means you will have to make some sacrifices, maybe cut down on some things. Watch out the way you spend as this might put your plans in jeopardy.
Maybe it’s time you start charging less on the credit cards or cut down on your Starbucks intake.
Anyway, the plan you put in place will show you what changes you will need to make on your spending in order to reach your goals.
- Sufficient saving
With a good financial plan, all the saving deficiencies will be highlighted too. Well, you need to have some money at the end of the day to take care of your plans right?
So, you are not supposed to only put your spending in check, your saving habits should also be looked at.
This means that you also need to have saving goals for you to reach your planned goals.
- Investment allocation
With a good financial plan, your risk tolerance will also be calculated and this will help you to invest in a way that is in line with the tolerance calculated.
Your planner should also be able to help you with the allocation of your investments. Meaning they will assist you in investing your money on different types of investments that are well performing.
As you all know, you shouldn’t be putting all your eggs in one basket. This will help you to increase your profitability and also protect your money from getting lost at once in case the investment fails.
The planner should also be able to suggest for you other investment opportunities that you might not be aware of. Remember, these people are professionals therefore you should be using their knowledge to benefit you currently and in future.
- Correct insurance amount
If you have a good financial planner, he or she must be able to assist you in finding out if you are insured properly.
The planner will have to look at the amount you spend averagely plus your large expenses you are expected to have in future like paying your son’s college fee and do their calculations and finally find you a good insurance cover.
This might see you reduce the coverage you have currently or purchase an additional one.
- Fully using the employer benefits
In most cases, you will find many employers offering different kinds of benefits to their employees. This usually includes health insurance, 401(k) plans among other plans.
You will need to have a good financial planner that will assist you and show you how you can fully use these benefits. This might see you sign up to a retirement plan that is sponsored by your employer and start contributing towards it.
You may also chose to reallocate funds that’s already in your 401(k). Well, others might see this method just as a small change but sometimes these small changes are what we usually need to help us generate some extra cash without working that hard.
- Planning for your assets after you die
Note the difference, having a financial plan will help you to plan for your money when still alive while an estate plan will help you determine where your money goes after you are gone.
You need to have a revocable living trust that will help in protecting your kids from the expensive and long probate process. This will also see you have a high level control.
This is why it is important to have both a financial plan and an estate plan as you risk losing a lot without them.
Conclusion
These are only a few benefits one can have when you decide to go for financial planning. As you have seen, financial planning is a very important thing to do as it covers each stage of our lives.
If you are interested in knowing more about financial planning, check out https://www.evolutiontownsville.com.au/ or meet with any local financial planner near you.
These people will give you an in-depth information concerning financial planning while also giving you a clear insight of the process.
Talking to these professionals might open your eyes as you will finally see there are many benefits one can get by having a financial plan.
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Category: Financial Planning
