Financial planning can make a difference in terms of whether you become prosperous in your future or broke. Financial planning is the key to personal economic success, and establishing financial plans for the next five, 10 or 20 years is crucial to achieving your aspirations of affluence.
Those who do not begin a plan on how they manage to stay afloat in these tough economic times can expect their personal net worth to diminish over time. Not creating some sort of budget for the future is detrimental to your prosperous dreams.
In this article, we shall examine how financial planning can assist you in each particular scenario, as opposed to not having one.
Debt
Those who live beyond their means are destined to live beneath their means. Unless a debtor establishes a plan to get out of the crutches of credit card companies, collection agencies and the enslavers, there is no way out of this disastrous situation.
In this case, your financial plan would be to make a budget. Calculate how much you earn a month, how much you spend on essentials per month (I.E. food, transportation, rent, etc.) how much you owe on whatever debt you maintain (I.E. credit card debt, outstanding balances on your cable/phone bills, loans, etc.) and how much you spend on non-essential items (entertainment, clothes, electronics, restaurants, etc.).
By doing this, you can understand your current financial picture. You will also have the opportunity to eliminate some of your spending in order to help pay off your debt. If you plan to stop heading out to the movie theater and restaurant every Friday night and plan to spend $10 less on your grocery bill, then you could easily help pay off that credit card bill.
Retirement
Social Security is in the red and is currently paying out more than it’s taking in. This isn’t just occurring in the United States, but elsewhere around the world. Furthermore, our currency is being devalued by central banks for a variety of reasons. Also, the cost of living is soaring every day.
If you create a financial plan, you will be ready for old age. Sit down, analyze your assets and think about what you want when you turn 65. Do you want to completely stop working and just relax? Do you want a part-time job to supplement your income? Do you want to travel?
Set priorities and write down your goals.
Emergency
Let’s face it. Not all of us can have luck or a bank account that will tie us over for the next several decades. However, if you have a financial plan in place, you can certainly hold steady for the next three months.
The general rule of thumb if you lose your job is to have money that will pay all of your essentials for the next three months. Having a financial plan will ensure that this priority is met because not all of us can foresee an emergency.
Put money aside for an emergency, outline what could possibly happen to you and be ready.