A number of people are put off by words like ‘financial planning’ or ‘financial plan’. Here we have a summary of the importance of a financial plan.
A financial plan will help you in the following ways
- The primary step towards any plan is to have a clear goal. Put your goal on paper because unless it is clear you will not be able to develop a path to achieve that goal. Understand that a number of our dreams are dependent on our financial plan like buying a house, comfortable retirement, etc. We all understand that dreams do not get fulfilled unless we work towards it with honest and sincere efforts.
- Clear goals will help you set achievable deadlines. This will help you figure out whether they are realistic or not. It will also help you know whether those wishes are within your reach or not. However, if you fail to make a plan, none of these things can be done.
- Once you are clear with your goal, it will motivate you to spend within your budget so that you can fund your goals.
- Apart from this, well set financial goals enable you to analyse whether your investments, goals and deadlines are in congruence with each other or not.
- Do not forget that you also have to keep a reserve for illness, stoppage of income due to a number of reasons, etc.
- Also, having a plan will help you identify your mistakes which probably would have been ignored if the plan did not exist.
- It will help you in identifying the milestones on your path and help you take corrective measures,if required.
- Analysing all this will help you look for better and new investment options.
- These simple steps will help you in taking suitable steps to be prepared for all the unforeseen risks in your life.
- You will understand the criticality of Retirement Planning!
- It will make you extra cautious about your spending and you will stand in a better position to explain money matters to your spouse and kids. Clear financial communication amongst family members will help avoid stress in relationships.
- Understand that a well-laid plan will gradually help you build wealth, achieve your goals and reduce stress.
I stress on making a financial plan because there is no valid reason behind not making one. HOWEVER, if you are reluctant or too lazy to do it, take assistance from a financial planner who will offer you better insights about the same.