3 Reasons to Make Financial Plans
Have you ever wondered why you wake up every day to go work? Sometimes you have braved harsh weather conditions like heavy rains, winter, hot sunshine and the recent pandemic to make sure you go work. We all need a good life; we need to drive those nice cars, go for vacations, afford a good meal at a restaurant, etc. We need to be able to pay bills that seem unending. From the time you start earning, you realize things that pull from your pocket seem limitless.
Since there is always a bill to pay, then to live a comfortable life in future, you need to be disciplined with money. There are some principles of money that you will need to adopt. They are uncomfortable, not fun and painful, but in the end, it pays off. These financial disciplines include budgeting and sticking by it. It is one thing to make a monthly budget, it’s another to stick by it. Another discipline you need to adopt is saving.
Saving is very painful for both the young and old. It’s more like postponing today’s pleasure for the future. When you have money with you, the things that come screaming to you ‘buy me!’ are endless. You have to be disciplined enough to say ‘No!’. to save, you must have a future goal that is more important than today’s pleasure. This will force you to save for it. To achieve any financial goal, you need solid financial plans. Let us look at other reasons why financial plans are important.
Steps to Creating a Financial Plan
The first step of creating a financial plan is to create a budget that details your savings, expenses and income. Appreciate where your money goes and your income monthly. Track this budget for some time to know your expenses and it will help you plan properly.
Set future goals and work on achieving them using number 1 above. One of the first goals is to get an emergency fund in case of a financial crisis. It will stop you from encroaching on your savings. Also, ask yourself what you want to own or do at a certain time. Specific goals will help you stay focused on your plan.
Start saving now. Don’t wait for a future time when your paycheck increase to start saving. It might never happen, so work within what you have now.
Build a portfolio within your financial plan. Plan not only for short term goals but long term ones like retirement. One key to investment is to save. Spend less and increase your income.
Have a financial plan exit strategy that will match your savings and investment. An exit strategy should entail how you apportion money and how you’ll get that money.
Consider best credit card offers like good interest rates. Constantly check your credit score so that you avoid any discrepancies.
Lastly, manage your financial plan. You need to keep checking with your plan whether you have achieved some goals or not.
Why Should you Make a Financial Plan
Manage Income
A financial plan will help you manage your income effectively. For instance, since in the planning you detail the expenses like taxes, bills and other monthly expenditures, you are able to apportion money appropriately because you have a goal to achieve.
Investment
It helps you plan for investment by considering your objectives, personal circumstances and risk tolerance. A financial; plan is a guide to help you choose the right investment options that match your personality, needs and goals.
Savings
A financial plan teaches you to save for a rainy day. When you create an emergency fund to help you in times of financial crisis, it is to help you not encroach on other savings. Also, a financial plan helps you appreciate some assets with high liquidity. These should help you during an emergency so you are not overwhelmed. Some people use these high liquidity assets for educational purposes.
Final Word
If you are looking to have a healthy financial future, then you might consider drawing a financial plan. From the steps above, you do it yourself, but it’s always better to seek professional advice. This plan will help you keep sane in case of emergencies and retirement.