Vacation plans, life plans, school plans, but how are we doing when it comes to financial plans? They are the ones that can positively impact all financial well-being or, on the contrary, affect long-term well-being. Let’s talk of 10 benefits of a financial plan.
Have you ever thought, “What are the real benefits of a financial plan, and why do you need one?” It is said that savings in any regular bank deposits or systematic investment plan do all the work in saving. However, ad hoc investments often lead to inefficient use of financial resources.
To become rich, apart from salary or additional income of any kind, you need to put money to work for you. This is essential and we have talked about it before.
A financial plan allows you to build a road map of your financial life to achieve all of your financial goals.
Is not income that matters the most. It is more important how much of this income you save and invest!
Let’s start by understanding what is a financial plan and why you need one
A good financial plan helps you fight changing circumstances on a personal level as well as on a macro level. In the absence of a financial plan, you might NOT achieve what you dreamed of and you might also be unprepared to deal with unforeseen financial situations.
Let’s see 10 benefits of a well-made financial plan
Cash flow management or budgeting
If you can’t figure out where/how your income is going each month, then you need to plan your finances better. Many people fail to understand how their monthly payments/salaries are spent, leaving them with nothing left to save. Impulsive buying and lack of budgeting lead to many problems in the long run. So, sticking to a budget is crucial to stay on track toward your long-term financial goals.
Effective debt management
Taking a loan can provide instant gratification. However, when debt turns into a dead-end trap, it’s time to get your finances in order with a financial plan. There are so many aspects that lead to the increase in our loans and access to credit cards and loans for personal needs. In most cases, these easily accessible financing options lead to the deterioration of financial health, leaving us in a financial mess.
A financial plan will not only help you get out of the perpetual rut of debt but also allow you to better manage your cash flow.
If your investments are chaotic and you’re not sure how and what to invest in, then it’s time to get your portfolio in order. Many often invest chaotically without sufficient research on financial products. In the ‘’About me ’’ section of the website, I detailed how I used to do this too.
In most cases, advice from acquaintances goes into the area of the hottest investment of the moment, which most of the time turns out to be just a cloud of smoke. Also, investing in an ad hoc manner leads to investments that become difficult to manage &track. The investment portfolios of such investors are littered with problems and investments that offer no diversification benefit.
Such investment portfolios must be consolidated and realigned to meet your financial needs or those of your family.
Investing in the right financial products
Many people invest in the capital market through individual stocks or speculative instruments. However, such investments are made based on recommendations received from acquaintances and without taking into account financial goals and risk appetite. In most cases, these investments made without a thorough analysis and an understanding of the risks, lead to the loss of investors’ money.
It is quite important to research any investment proposition. Building a financial plan will allow you to review your portfolio and get the right asset allocation for the best possible results.
Something we must not forget is that it is never wise to put all your eggs in one basket. It is vital to understand that not all assets move in the same direction at the same time. It is important to have different financial instruments to invest in. Frequently improve your chances of achieving your long-term goals with minimal turbulence. A proper asset allocation for you can be designed through a financial plan that acts as a shield to protect your wealth in uncertain economic conditions and market volatility.
Getting rid of inefficient financial products
Have you thought that you need a financial coach to eliminate ineffective financial products? Maybe you should add getting rid of impulse financial products to your year-end to-do list. Some have low returns simply because of the large number of commissions involved. A financial coach can help you understand which products suit you best and which ones should totally be avoided.
Calculating the right insurance coverage
In case of unpredictable life circumstances, well-calculated insurance could be a financial waterproof coat for you or your family members. While life insurance guarantees that your family members can maintain the same standard of living, even in your absence, others can cover possible holes in the budget. A holistic financial plan will consider your income, expenses, and goals to determine which types of insurance suit you best.
Setting SMART financial goals
If you want to plan for financial goals like buying your dream home, child’s education, retirement, etc., prudent financial planning can lead to guaranteed success.
From experience, I can say that many live for all the goals mentioned above, but the lack of prudent financial planning and/or delaying the execution of the financial plan prevents the achievement of the set financial goals. So, it is imperative to make a prudent financial plan and follow it diligently to make your dreams come true.
Breaking a regular investment habit
To create long-term wealth, investing with discipline and determination is key. Even a child needs discipline and regular monitoring to achieve their goals. Investing small amounts regularly will also prove to be easy on the wallet, be it virtual and reduce the burden of staking a huge amount in your bank account.
A plan for long-term goals
If your financial plans seem unclear and your financial well-being seems far away, I invite you to embark on a financial journey adapted to your long-term needs and dreams.
Don’t forget to register for the START INVEST conference, specially designed for early-stage investors, and let me take you step-by-step through the industry-tested steps you can take to build a profitable portfolio.
Use the code “15MIHAI” and get a 15% discount on the price of tickets that provide access to the registration. Get your financially wise path!