What is a Financial Plan and Why You Need One
Take Control Over Your Finances With A Financial Plan
If you’re like most people, you probably think of financial planning as something only millionaires need to worry about. The truth is, though, that everyone needs a financial plan – even if you’re not wealthy. A good financial plan by ex-ponent.com will help you make the most of your money and ensure that you’re on track for a secure future.
A financial plan is a set of guidelines for managing your money. It can include information about investments, retirement planning, budgeting and debt management. Your financial plan might also contain information about insurance policies and estate planning. Some people refer to this as their “financial roadmap,” since it provides direction for their spending and saving decisions.
But why do you need a financial plan? One reason is that it helps you make the most of your income and assets. A good financial plan will identify gaps in your finances (such as unused credit card limits or underfunded retirement accounts) – allowing you to make changes before they become serious issues. Furthermore, having a solid financial plan gives you security: by knowing what steps you need to take now to achieve your future goals, you can rest easy knowing that you’re on track for financial success.
If you don’t have a financial plan in place already, now is the time to start one! Here are some tips for creating your own:
Figure out what’s important to you: Before you can begin making decisions about your finances, it’s helpful to understand what personal and professional goals are most important to you. Is early retirement an important goal? Are there certain experiences that mean a lot to you – such as traveling or spending more time with family? Understanding what matters most will help shape how much risk (and how much money) you should be comfortable putting into each area of your life.
Identify your assets and liabilities: A good financial plan will start by identifying your net worth – that is, the value of all your assets (savings, investments, retirement accounts) minus any debts you have. In addition to helping you understand where you stand financially, this exercise can help motivate you to take action: when it comes time to think about how much money to save or invest each month, knowing the extent of your debts can be a powerful reminder of why prioritizing savings is so essential.
Create a strategy for investing and saving: An important part of building wealth is investing. Ideally, you’ll put some money away in an investment account on a regular basis – ideally at least 15 percent of your income. If you’re not sure where to get started on your investment strategy, seek out the advice of a financial advisor. They can help you determine how much money you should put into stocks or mutual funds, and offer tips on when to buy (and when to sell) investments.