Every one of us has different goals in life, and our goals fall into two main categories: personal and professional. However, regardless of the type, most of our goals are associated with money in one or another way. Be it getting admission at a reputable college, establishing a startup, getting married, planning for family life, or retiring early, you need to think and work for the financial aspects of all of them.
Those who have plans for handling their financial matters have a higher rate of achieving their goals. And you can get stuck in life if you act randomly and do not bother planning things out.
Here is how efficient financial planning can make your future secure and stable;
Financial Planning helps you set your Financial Goals
The best thing about financial planning is you can identify your financial goals through it. For instance, if you are aiming to get an admission at a university with a higher tuition fee, you must set a target amount that you would need to complete your education other than studying hard. That is your financial goal; it gives you the clarity of where you are heading and the time frame to act timely.
In your case, your target amount would be X (the total amount of money you would need to graduate) that you have to collect throughout Y ( total duration from now till you pass out) years.
It gives you a Framework to act upon
When it comes to individual financial planning, we all make rough plans and calculate things randomly in our minds. Can we call that financial planning? Yes, but to some extent. It might help us sometimes, but that doesn’t work always. We need a proper framework for our plans to be effective.
After you have defined your financial goals, the next step is to assess your current financial status, which is your net worth( the value of your assets minus your liabilities). Moreover, you need to find out whether your expenses are less than your means or higher. Identifying these factors gives you a clear picture of where you are standing and a direction to move in.
Financial Planning makes the process of earning and saving easier
Let’s put it in a rather simple way. When you have got the target number in your hands, and you know the timeline, you now need to find out ways through which you can achieve your target. That is mostly done by saving more money and increasing your income. But is that easy? Financial planning can make it simpler and applicable if done efficiently.
In the case of the financial planning for higher studies, you can save more by cutting out your unnecessary expenses such as having an expensive coffee regularly or buying clothes very frequently. On the other hand, you can do a part-time job at a restaurant or work online to increase your income. But in doing all that, you need to be specific regarding the timeline. For instance, how much money you need to save daily or earn in a month.
Saving money and doing it right can help you immensely in achieving your financial goal. For instance, Grant Sabatier, a self-made millionaire at 30, acquired financial freedom by formulating and applying an efficient method of saving. According to him, it is not an effective approach to work for a bigger saving number.
Instead, make smaller goals like yearly, monthly, and daily saving goals. But how? First, divide your target amount by the number of years during which you would be working before your retirement. That would be your yearly saving goal. Now, divide it by the number of months. Then, sub-divide the monthly saving target into weeks and days.
If these are not done accordingly, you may need to work after retirement to make bucks. The same formula can be applied to other financial goals with small changes.
This article is not the substitute for any professional consultation or an ultimate guide to financial planning. However, it aims to give an insight into the importance of effective planning in achieving financial goals.
In short, you do not need to be an entrepreneur, businessman or have a high income to start planning out for your financial matters. Financial planning is indeed not bound to numbers or status; it can help anyone with any financial background to accomplish their goals.