THE BENEFITS OF FINANCIAL PLANNING
Financial planning is oft en mistakenly assumed to be a concern for the wealthy. Th at assumption essentially promotes the idea that people without much money need not worry about what to do with their finances. However, financial planning can benefit people at all income levels.
Though having an idea of how to spend and grow your money is an idea many people would likely embrace, a significantly large number of people do not have a financial plan. In a recent Household Financial Planning Survey, the Certified Financial Planner Board of Standards found that just 31 percent of financial decision makers in families had created a financial plan. Some survey respondents did so on their own, while others used the service sofa financial planner. Though some might be intimidated or even scared to institute their own financial plans, it can be done. For those who are especially hesitant to develop their own financial plans, financial planners can help them define their goals and make those goals a reality. The benefits offinancial planning are numerous, helping men and women build better financial futures.
A financial plan forces you to define your goals. One of the biggest advantages to financial planning is it forces men and women to define their financial goals. An effective financial plan should consider both short- and long- term goals. If you hope too neda yow na home, a financial plan can help you figure out how quickly you will own that home. A good financial plan also can help you map out a course for retirement. Ambiguity with respect to your finances is potentially dangerous. Saying you want to retire at 60 and developing a plan to make that happen are two very different things, but the latter can make it happen, while the former won’t get you anywhere unless you take action. A financial plan can help you curtail your spending. With a financial plan in place, you’ re less likely to waste your money on frivolous things. Without a plan, you’re more likely to treat money as disposable, putting your financial future in jeopardy as a result. A careful examination of your financial situation can shed light on areas where your spending is excessive. A negative cash fl ow, which occurs when there is more money going out than coming in, has never been part of a successful financial plan.
A financial plan can be motivational. Another significant and often overlooked benefit to financial planning is how such planning can act as a motivator. A good financial plan will include certain measuring sticks, such as having debt paid off by a particular date or a day by which you hope to deposit a certain amount of money into your savings. These measuring sticks often motivate men and women to be more responsible with their money, and many people find living up to short-term financial goals to be very rewarding.
A financial plan makes better use of your money. Even if you don’t have any negative spending habits, a financial plan can help you make better use of the money you do have. A closer examination of your finance scan often yield a host of ways to grow your money or save it. For example, you might have multiple insurance policies, some of which off er duplicate coverage. Examining each policy and removing duplicate coverage can save you money and help you spend that money in better ways. You wouldn’t pay for the same slice of pizza twice, so why pay for the same coverage twice?
A financial plan helps you grow your money. Even if you are worried about investing or especially skittish when it comes to risk, you will need to find ways to grow your money, and a financial plan can help you do just that. The concept of inflation dictates that the dollar you have today won’t be worth as much next year, meaning you will need to take steps to grow your money if you hope to have enough to get by in retirement. A financial plan can help everyone, whether they’ re risk-a verse or not, grow their money. Something as simple as opening an interest- bearing account will grow your money more than if you were to put that money under the mattress.