Financial planning is the process of finding out where a person stands financially. This long-term money management strategy outlines how a person’s money, assets and investments can be used to help them reach certain financial goals. Still wondering what is the main goal of financial planning? It is to help individuals as they build wealth.
Financial Planning vs. Retirement Planning
Financial planning and retirement planning are often confused as both types of money management solutions focus on saving for the future. A financial plan focuses on saving and investing money with the objective of having enough to hit certain short-term and long-term goals. By comparison, retirement planning focuses on expenses after a person stops receiving paychecks and how certain savings and assets can help generate an income stream that covers these expenses during retirement. Both financial planning and retirement planning can be life-long processes or can begin later in life.
Why Start The Financial Planning Process?
Starting the financial planning process can provide individuals with the confidence they need to make good financial decisions. Ideally, financial planning should begin early in life as this gives individuals more time to build wealth. However, financial planning can start at any age, even at retirement.
Here are just a few reasons to start the financial planning process.
Accelerated Savings
Establishing a financial plan can help individuals potentially achieve accelerated savings which can build to a significant sum over time. According to Bankrate.com, the typical American family has an average of $8,863 in an account at a credit union or bank. People who participate in financial planning can save a significant amount more – about an average of 10 percent of their income. A financial plan not only encourages savings but can also help track savings. By comparing a benchmark to progress that occurs month after month, a planner is better equipped to adjust their budget to meet their unique goals.
Building Financial Confidence
When a person creates a budget and sticks with it, they know exactly where their money is going each month. This can instill confidence and help a person feel more financially stable. When a person does not follow a budget, they can easily lose track of their spending. At the end of the month, they may not know what they spent their money on, which can be stressful. In some cases, there may not be enough money at the end of the month to pay bills. Financial planning takes the mystery out of spending as each dollar is tracked throughout the month.
Attaining Clarity
Money can be a stressful topic, especially when a person has experienced money problems in the past. When there is not enough money to pay all the bills, it is easy to feel the strain. In addition, money problems can make it difficult to build a nest egg or meet long-term goals. However, financial planning can help individuals move away from this paycheck-to-paycheck mentality and potentially achieve a more financially secure lifestyle. It can also provide peace of mind and boost overall happiness and wellbeing.
Living Comfortably Now & In the Future
Many people rely on money as a way to feel content. They may use their money to buy material items or to enjoy dining out and entertainment. Financial planning helps individuals feel more content with what they have by putting the focus on future goals instead of current desires. A well-developed financial plan can help encourage savings while also allowing a person to live comfortably both now and in the future. There is no need to sacrifice when budgeting as a comfortable lifestyle can be achieved with proper planning.
Reaching Financial Goals
It can be challenging to reach long-term goals when every cent goes towards bills or other financial obligations. Financial planning gives individuals the ability to break down their finances and find areas where spending can be cut to save money. Once there is extra money in the budget, this cash can be saved for future goals or invested to help make the money grow faster. The right financial plan can potentially help people reach their goals faster than they ever thought possible.
Reach Out To A Professional Wealth Management Firm
Financial plans can be an excellent source of motivation and teach people to commit to their future goals. They can also help reduce the uncertainty that often surrounds finances and can provide some clarity as to the best way to utilize money. The first step involved in financial planning involves speaking with an experienced financial planner about short-term and long-term goals. A financial planner can help establish a realistic budget and develop a financial plan that encompasses important objectives. For more information about financial planning or to speak with a professional wealth management firm, contact the experienced professionals at Campbell Wealth Management, Inc.
