Financial planning is the backbone of financial freedom. Lack of proper financial planning is a recipe for trouble. Unfortunately, many people still don’t take financial planning seriously.
The good thing about a plan is that it holds you accountable. It gives you a sense of direction as far as your finances are concerned.
Making a personal financial plan is a way of investing in yourself together with your future. If you are not sure how to do it on your own, then professionals from North East Financial Planning Melbourne can be of great help.
Hiring a professional to assist you in planning your finances generally increases the chances of making that plan work. The work of a professional is simply to guide you in the financial planning process.
Below are some of the best things about financial planning:
1. It keeps you organized financially
Failing to plan is planning to fail. This statement is true in almost every aspect of life -including your finance. If you do not plan how to spend your money, then it won’t take long before you get into a financial crisis.
Financial planning involves setting up goals – both long-term and short-term. Those goals are the ones to guide you in achieving what you want.
For instance, if you want to purchase a home in the next five years or so, the best thing will be to set saving goals. This will enable you to set specific targets that will ensure by the time five years are over, you have the exact amount to purchase your home.
2. Encourages financial discipline
When you have a financial plan in place, it is not easy to waste money on unnecessary things. It will help you create a budget and stick to it. That means there will be no room for money wastage.
For example, if your budget for food is $1,500 per month, you will do everything possible to stick by that and avoid making purchases above that limit. Besides that, in case you have someone helping you, they will always remind you when you miss any step.
Having a financial plan in place will always keep you in check. You will have to account for every dollar that you earn. That means you won’t engage in careless spending – because at the end of the day you will need to explain every expense.
Accountability is more visible if you have to hire a financial planner. He or she will always be on your neck to ensure that you are getting everything correct with regard to your finances. A financial planner will also be there to offer necessary advice when you appear to lose direction.
4. A sense of security
With a financial plan in place, you will have peace of mind – knowing that everything is in order.
Financial planning means taking care of everything that matters to you. It means creating an emergency fund, saving for your retirement, taking care of bills, and so on and so forth.
Doing so will eradicate all the financial insecurities and allow you to focus on other important things.
5. Management of debts
One of the main reasons many people find themselves entangled in debts is a lack of financial planning.
Without a proper plan, you will find yourself spending money carelessly without budgeting for the future. A financial plan will ensure that you live within your means and avoid debts as much as possible.
6. Saving culture
There’s no doubt that saving is not easy. Most people often start and end up withdrawing every penny before the end of the year.
However, a financial plan will put a measure that will encourage you to develop a saving culture. In case you aren’t able to create ones for yourself, it would be good to seek the services of a professional.
7. Prevents wastage of money
Maintaining financial discipline without a proper financial plan is close to impossible. As soon as you receive money, you will find yourself purchasing things that aren’t necessary. Within a short time, you will be broke and borrowing.
But with a financial plan, most of the money will directly be channeled to important areas such as emergency fund account, savings, and insurance among others.