Financial planning is important. You would be hard pressed to find anyone that would disagree. The problem is that most people simply give lip service to the whole idea of building a solid financial future. Instinctively, people want to achieve their life goals yet many do not know how to even get started.
As such, I wanted to take a closer look at the benefits of financial planning.
What is Financial Planning?
Financial planning is the process in which you can achieve your life goals. Whether you want to buy a house, build your kid’s college fund, or save money for retirement, it is crucial that you focus your efforts on building a solid financial foundation. Sound financial planning is the way to take advantage of your ability to earn money and to become financially free.
The objective is to help you define your goals and to develop an approach to accomplish them. Sometimes it will be fun. Other times it will feel like torture. Either way, if you stick with it you increase the likelihood that you will build a substantial amount of wealth over the course of your lifetime.
The Benefits of Financial Planning
If you fail to plan, how will you know when you get there?
Financial planning helps you to focus on where you want to go. It provides a meaningful path to managing your financial decisions. Each decision builds on others which helps propel you closer, or further away, from your overall goals. Instead of viewing each decision as an isolated choice, financial planning helps you to see it as part of the big picture.
How Can Financial Planning Help?
When you develop a solid financial plan, it helps you to get what you want at each stage of your life. It aids in the preservation of your assets, helps control costs, and increases your net worth. A sound fiscal plan ensures that you have sufficient insurance to protect against disability, loss of income, loss of gainful employment, medical expenses, and even death.
What are the Major Areas You Need to Focus On?
While they are literally thousands of subsections within the realm of personal finance, here are the major areas in which you should focus your attention:
Debt Management – It is virtually impossible to build lasting wealth if you are financially overextended. Focus on lower, or eliminating, your outstanding consumer debt.
Emergency Preparation – You will experience a real financial emergency at least once in your lifetime. It is simply a matter of when; not if! For us, this occurred last year when we incurred more than $10,000 in medical bills (not including co-pays and prescription costs). Rebuilding our emergency fund is once again a top priority.
Building Wealth – I have found that slow and steady typically wins the race. Try and get into the habit of saving money each and every paycheck while adding to your investment portfolio when possible.
Planning for Retirement – It is safe to assume that social insecurity will not be around for much longer. Even then, did you honestly believe you could have lived very long off the ‘benefits’ you would have received? When planning for your retirement it is important to consider how much you will need in order to maintain your desired lifestyle.
If you have goals, then you need a plan. Developing a sound financial plan is the key to achieving those goals.
Have you thought about your financial plan lately? What things do you need to concentrate on?