The Benefits of Financial Planning
As a child, if you ever went on a road trip with your family, you may remember your parents buying a map and plotting out a route to reach your destination. When you think about reaching your financial goals, remember that your journey to accomplish your goals is much like the road trip as a child. The roadmap for your finances, a well-defined financial plan, is essential to reaching your destination successfully.
Although many of us have defined financial goals for our future, a Household Financial Planning survey indicates that only 31% of families have actually created a plan to reach those goals. The same study reveals that 35% of people have a plan to save for emergencies, and only two-thirds have plans for meeting savings goals, such as for retirement, a child’s education or a down payment on a house. Research done by the Employee Benefit Research Institute also shows that only about 40% of workers know how much they need to save for retirement. Although in the short run, it may seem cheaper and easier not to bother with creating a financial plan, this belief will hurt you significantly in the long run. If you are among the majority of Americans without a financial plan, it is important for you to understand why you should develop a plan to help you meet your goals.
To set attainable goals and measure your progress along the way. Getting out of debt and securing your financial future will not happen if you do not set specific goals and a realistic timeframe in which to meet them. Simply saying, “I want to get out of debt” or “I want to buy a house” does not give you a strong potential for achieving those goals. If you are having a difficult time understanding and allocating your own finances, working with a qualified financial professional to develop a financial plan will help you define your goals.
A financial plan is not a “set it and forget it” way to reach your goals. It is a method that must be revisited often to determine whether you are on course to meet your benchmarks and readjusted to accommodate any changes to your overall finances.
To gain better insight of your financial situation. Understanding your finances helps you set goals and create fundamental skills in planning and important decision-making. According to Forbes, a lot of people start out their “Real World” experiences not knowing what their credit score means, or the difference between a 401K and a Roth IRA (or the importance of either). Creating a financial plan can help you analyze your specific financial situation. It will help you manage what you have and where you want it to go. Although many feel like financial plans are only for people with a significant amount of money, studies show that a comprehensive financial plan benefits people at all income levels, even those living from paycheck to paycheck.
To make the most out of the money you earn. According to CNN money, a budget is the only practical way to get a grip on your spending and to make sure your money is being used the way you want it to be used. However, Deseret News explains that two-thirds of Americans do not budget. The 32% of Americans that DO have a budget and primary savings in place are able to develop an investment strategy for accumulating wealth based on their level of risk and lifestyle goals. Often, an outside perspective on your financial situation may help you create new practical ways to save more money or increase the money you earn. A financial advisor will help you realize your full saving and earning potential by matching your risk tolerances and goals based on your specific financial situation.
Assess your financial situation to help identify ways to improve your financial well-being. Start by plotting your route down the road to financial success in order to achieve your goals. If you need help creating your financial plan, contact Financial Asset Management Corporation.