Financial planning involves more than just saving money for the future. It is also about protecting against financial losses, estate planning, retirement planning and accumulating wealth for important financial goals, such as a down payment for a house or a child’s education fund. The financial planning process can begin at any age, but the sooner a person begins managing their money, the more wealth they build over time.
Who Benefits from Financial Planning?
The financial planning process can help people determine whether they are on the right track towards meeting their goals. It also outlines a suitable path towards potentially achieving financial success. Many people wonder if financial planning is right for them and the answer is very clear.
Who can benefit from financial planning?
In its simplest form, a financial plan is a map designed to help a person reach their goals. This does not necessarily mean only financial goals, but also life goals. Money is a tool that can help people reach all types of goals, whether a person wants to reach retirement debt-free, go on their dream vacation, purchase a new vehicle, go back to school or pay off their mortgage early.
To determine a person’s current financial status, it is important to look at their net worth and budget. To determine net worth, create a list of all assets and their worth. Next, list all debts. Finally, subtract the debts from the assets and that is the net worth. When setting a budget, it is important to calculate how much income is brought in and how much money is spent each month. This is a great way to see where a person overspends and where money can be saved to put towards debt and other goals.
The Main Benefits Of Financial Planning
Financial planning is an effective way for people to prioritize their goals based on what is most important to them. A plan of action can then be created to help achieve these goals using the resources available. A person does not need to be rich to benefit from having a financial plan and budget.
Here is a look at some of the top benefits of financial planning and how a qualified financial planner can help individuals meet their long-term objectives.
Great Source of Motivation
Financial planning can be a terrific source of motivation, especially for people who have trouble reaching their goals on their own. It can be difficult to stay motivated where there are no clear goals set and no expectations. A financial plan helps to eliminate these uncertainties by painting a clear picture of what needs to be accomplished and how a person will get there. Hiring a financial planner can help in this aspect too as he or she will provide some accountability and provide ongoing encouragement. This can drive a person to continue saving and working towards other important financial goals.
Provide a Guide for Action
Most people know what their financial goals are but are unsure of how to reach them. Creating a budget will not help a person reach their goals unless they are determined and have a clear guide for action. Taking certain financial actions can often be stressful, especially at the beginning of the journey. People going through the financial planning process may be forced to compromise and make difficult decisions but these efforts are often worth it in the end. Perseverance, in combination with a clear financial plan, can potentially help put a person in the best financial position.
Set a Performance Standard
Financial planning not only defines long-term goals but also milestones along the way. Milestones are necessary when setting long-term goals to help measure progress and maintain motivation. There are certain performance standards that everyone should strive to meet, such as paying down debt, saving money for emergencies and building a nest egg for retirement. There are also performance standards that are personalized for each person, such as putting 20 percent of each paycheck into savings or paying down $20,000 in high-interest debt to reach a lower debt-to-income ratio. Setting performance standards can help keep people on track and help them see how far they have come.
Start Your Financial Planning Journey with Campbell Wealth
It can be difficult to effectively manage income and expenses, especially without a financial plan in place to provide an actionable plan. A financial plan can help guide a person in the right direction as they pay down debt and build wealth. Everyone’s financial future is different and no two financial plans are exactly the same. For this reason, it is important to consult with an experienced financial planner to create a strategic plan for saving and allocating finances. For more information about the benefits of financial planning, what the professionals at Campbell Wealth Management, Inc. call Financial GPS, contact them today. They would love to set up a complimentary consultation and start laying the foundation for your financial future.