Why is it important to have a financial plan?
Financial planning is an ongoing process of managing your money in such a way that it allows you to achieve the goals you have set in your life. These goals could be getting married or getting a degree. Everything requires money. In other words, financial planning is a way to ensure that you have the money to achieve your short term and long-term life goals. It would help if have some understanding of finance to do financial planning. However, whether you have a financial acumen or not, you can always take help of financial experts or take up online courses in finance to gain financial knowledge.
Financial planning lets you make financial decisions and keeps you on track to meet your goals. A good financial plan is useful for people of all economic strata. It is important for a variety of reasons. Some of them are listed below –
- Financial Planning lets you decide your financial goals
If you go to any financial planner, he will ask you what your goals are. It could be that you want to save 1 Crore in 10 years or that you want to buy a house in the next 5 years. Your goal can be anything, financial planning starts with it. Most people do not think about it and financial planning makes them to think.
- Financial Planning makes you check if your plans are realistic
Once you have set a goal for yourself, it is time to think of the way to get there. You would have to decide which tools to use and how much time it would take. Sometimes your goals may not be practical or attainable for a given timeline. It may be that they require more money initially than you can invest at the beginning. In that case, it might help to look at changing some parameters like giving yourself more time to achieve those goals.
- Financial Planning Keeps your splurging habits in check
A financial plan put in place, will keep you from spending money on things that you don’t need. If there is something that is outside of the monthly budget, then you will not be spending money on it now that your money is already invested elsewhere. The logic behind this is that you have already taken out money from your monthly income for saving purposes, whatever is left is for you to spend. When we don’t have a financial plan, we do the opposite, we spend first and then save what is left. We can say that financial planning helps us bring our spending habits in line with our financial goals.
- Financial Planning Shows you new ways to maximize your money making
When you start planning your finances, you are aware of how you are progressing and whether your investments are good or if they can be better. In this way, you look for newer ways to make more financial profits. It also makes you smarter in understanding the risks with various investment tools as well as teaches you to look at the past financial mistakes you have made and how to fix them.
- Financial Planning Lets you measure the progress on your goal attainment
Once your financial plans are made, you can split the progress into monthly goals. For example, your goal can be to save a certain amount of money by way of savings or investments every month as part of your bigger financial planning. This will become a monthly realistic measure of your financial planning success. If you are falling short of your monthly goals, then you need to have a second look at the tools you are investing and make some changes. There could be some mistakes you did not see earlier and can fix. In this way, financial planning will help you be on top of your goals on a routine basis.
- Financial Planning will provide you with security for life
Once you get an idea of financial planning, it will give you the confidence to plan even better and make you sure of your future income. This will give you a life security as you will be in control of your finances. People who have a financial plan in place live a more comfortable life than those who might earn more than them.
Financial planning is the key to confidence and security for life. It keeps you on track and helps you make sound decisions with your money. You do not necessarily need a professional expert to handle your finances. A lot of people enthusiastically manage their own finances. All you need to do is build up your finance acumen by reading or enrolling yourself in a financial course available online. With proper financial planning, money worries will be a thing of the past.
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