Financial planning can be a strategic tool for analyzing a person’s financial situation and determining what steps are necessary to reach specified goals. There are many different factors that can impact the financial planning process, such as those relating to health, age, career choices and family structure. Understanding how these factors affect financial planning is key in the development of a realistic and actionable financial plan. So, what are the factors affecting financial planning?
Main Factors Affecting Financial Planning
People make decisions everyday regarding their finances. They decide how much to spend on groceries, electronics, vehicles, education and their homes. They may also choose to make retirement contributions and other strategic investments for their future. Every decision made in life can make an impact on a person’s finances. By learning more about the main factors affecting financial planning, people are able to better recognize their spending habits and become better equipped to make sound financial decisions.
Some of the top factors that affect financial planning include the following:
One of the biggest factors that influences a person’s finances is their spending behavior. How a person chooses to spend their money impacts how much they are able to save or how much debt they accumulate. Ideally, a person should live within their means but this does not always happen. Overspending can result in a buildup of debt, high interest rates on credit cards and a loss of credibility among lenders. Some people will experience other consequences of overspending, such as the inability to pay back their debts. Creating a budget and being watchful of all expenses can ensure that a person lives comfortably without contributing to more debt.
Savings & Investments
Savings and investments also greatly influence a person’s financial plan. Making the wrong investment can result in months or even years of financial hardships. While investments can certainly pay off over time, it is important to speak with a qualified financial planner before making any major investments to prevent catastrophic losses. Savings should also be approached with great care. There is no one best way to save and making this decision lightly could result in feelings of regret in the future. A financial planner can potentially help ensure that a person chooses the investment vehicle that is best suited for their budget and needs.
Your Financial Goals
A person’s financial goals will also have a tremendous impact on their financial plan. Some financial goals will be easier to meet than others. Therefore, it is important to make a list of all goals and prioritize them based on how long it will take to achieve them and which are most important. It is also important to consider whether the goals set are achievable or if they need to be modified for practicality. A person’s financial goals should always align with their financial plan. This makes it easy to turn goals into actionable milestones.
The Current Economy
When developing a financial plan, consider the current state of the economy. When the economy is thriving, a person will be in a better position to increase their savings, make better investments and focus on reaching their financial goals. However, when the economy is poor, it is often better to focus on maintaining a cushion to act as a source of protection for possible difficulties in the future. The economy can change quickly and unexpectedly so it may be necessary to adjust the financial plan on a regular basis to keep up with the current economy.
Working with a Financial Planner
The financial planning process can often be complex and confusing, especially if a person has a lot of income coming in or a lot of expenses going out. Working with an experienced financial planner can help a person better understand their financial state and make plans for the future.
A financial planner can assist in all aspects of the financial planning process, such as setting goals, making investments, creating a budget and paying down debt. Financial planners also have an extensive knowledge base and can answer questions or address concerns that a person may have about their finances. Anyone that needs help planning their financial future can benefit from hiring a financial planner.
Contact the Financial Planning Professionals For More Info On The Factors Affecting Financial Planning
Many people have difficulty managing their money or may be unsure about the best way to save or invest their funds. Working with an experienced financial planner can provide individuals with an impartial third-party who is knowledgeable about finances and investments and can provide guidance about the best way to approach their goals. Many people find that taking the initial steps to better manage their money gives them a sense of control over their situation. To learn more about the factors that affect financial planning or to speak with a financial planning professional, contact Campbell Wealth Management, Inc.