Many people believe that financial planning can be overwhelming, stressful, and difficult. However, having a financial plan is essential. It allows you to set goals to make sure that you can afford certain things in the future and stops you from spending all your money on items you don’t need.
If you have never had to do any financial planning before and are wondering where to begin, here’s everything you need to know about the benefits of financial planning, as well as some tips to help you get started.
Benefits of financial planning
Allows you to set goals: whether they be short-, medium-, or long-term goals. A financial plan will allow you to start achieving the goals you have always dreamed of. Have you always wanted to own your own home? Planning your finances will help you get there quicker.
Allows you to track your savings: whether you are saving for retirement or your dream car, you can use a financial plan to track your savings goals so that you know you are heading in the right direction. It can also help ensure that you save for an emergency fund so that you never need to worry if you have to pay for an unexpected expense.
Gives you peace of money: studies have shown that around 75% of Americans are stressed about their finances. Once you can keep track of your finances and savings, you will no longer have to stress about where your money or if you can afford certain items.
What should I include in my budget?
One of the most important aspects of financial planning is budgeting. Budgeting allows you to see how much money you have coming and going each month. Budgeting allows you to calculate how much money you can afford to be spending and how much you should be saving so that you never have to worry about getting into financial difficulty. Here are some things you need to include in your budget:
Debts and loans: if you have student loans or credit card debts you are paying off each month, you need to include these in your budget.
Savings: this should be the amount of money you want to put away in a separate bank account each month to save.
Housing essentials: rent, mortgage, electricity providers bills, insurance, etc. all need to be included in a budget.
Car expenses: including insurance costs, fuel costs, and maintenance costs.
Other items: such as personal care, groceries, entertainment costs, and healthcare costs all need to be considered when budgeting.
As you can see, there are a lot of things you need to budget for when planning your finances. However, it will be worth it in the long run.
Tips on sticking with your budget and financial goals
Once you have created a financial plan, the hard work begins. You need to ensure that you will stick to the plans you have made. Here are some easy ways to do this:
Set up direct debits: once you have worked out how many monthly payments you have to make, you can set direct debits up to ensure that you never miss a payment. You can also set up direct debits to your savings account so that you can be certain you are paying enough money each month.
Rewarding yourself for every financial goal you achieve: although some goals are long-term (such as saving for a deposit on a house), you can easily create incentives that will keep you motivated. For example, you could buy yourself a small gift when you complete a small financial goal and reward yourself with something big (like a vacation) when you complete a major financial goal.
Financial planning is essential for everyone. No matter what stage of life you are at, planning your finances can help you achieve goals and will also make you less fretful about money.