Ten reasons why financial planning is important
Here are ten powerful reasons why financial planning – with the help of an expert financial advisor – will get you where you want to be:
It's possible to manage income more effectively through planning. Managing income helps you understand how much money you'll need for tax payments, other monthly expenditures and savings.
2. Cash Flow
Increase cash flows by carefully monitoring your spending patterns and expenses. Tax planning, prudent spending and careful budgeting will help you keep more of your hard-earned cash.
An increase in cash flow can lead to an increase in capital. Allowing you to consider investments to improve your overall financial well-being.
4. Family Security
Providing for your family's financial security is an important part of the financial planning process. Having the proper insurance coverage and policies in place can provide peace of mind for you and your loved ones.
A proper financial plan considers your personal circumstances, objectives and risk tolerance. It acts as a guide in helping choose the right types of investments to fit your needs, personality, and goals.
6. Standard of Living
The savings created from good planning can prove beneficial in difficult times. For example, you can make sure there is enough insurance coverage to replace any lost income should a family breadwinner become unable to work.
7. Financial Understanding
Better financial understanding can be achieved when measurable financial goals are set, the effects of decisions understood, and results reviewed. Giving you a whole new approach to your budget and improving control over your financial lifestyle.
A nice 'cushion' in the form of assets is desirable. But many assets come with liabilities attached. So, it becomes important to determine the real value of an asset. The knowledge of settling, or cancelling the liabilities, comes with the understanding of your finances. The overall process helps build assets that don't become a burden in the future.
It used to be called saving for a rainy day. But sudden financial changes can still throw you off track. It is good to have some investments with high liquidity. These investments can be utilized in times of emergency or for educational purposes.
10. Ongoing Advice
Establishing a relationship with a financial adviser you can trust is critical to achieving your goals. Your financial advisor will meet with you to assess your current financial circumstances and develop a comprehensive plan customized for you.
Success as an investor starts with the key questions of why, what, where, when and how.
Recently, one of America’s largest life insurers (New York Life) did a survey of over 2,000 people to find out what they considered to be their largest financial mistakes, and how long it took to recover from them.
Rob and Mary