Did you know that around half of Americans feel that their finances are headed in a negative direction? The same data showed this was the case for even those with very high incomes.
Without proper financial planning, it becomes harder to improve your situation and meet your financial goals. As a result, you can run into not only short-term issues paying bills but even find it hard to retire later on.
But what is financial planning, and what does it involve? Read on to learn about the process and benefits.
So, What Is Financial Planning Exactly?
Financial planning involves looking at your current financial situation and goals and then coming up with steps to take to get where you want to go financially. It encompasses everything from making a monthly budget to saving for retirement and major purchases.
For example, if you struggle with debt, financial planning would involve first looking at your income and debts. You would then come up with a payback plan and deadline to get rid of that debt.
If you’re considering long-term goals like retirement, then financial planning would involve assessing how much you’ll need at that time of life and what income sources you expect to have. You could then look into different investment options and determine the amount you need to save and earn to meet your goal.
What Are the Benefits of Financial Planning?
One of the main benefits of financial planning is that it can help you make smarter decisions with your money. By having a budget and knowing what you have and owe, you can make wiser purchase decisions and find ways to trim your budget. Thus your family can live a more comfortable lifestyle.
Financial planning can also help you maximize your return on money saved. By looking at different types of savings accounts and retirement plans, you can consider the money you can afford to save and weigh the pros and cons of investment options.
Other benefits of financial planning include a better likelihood of reaching your financial goals, more peace of mind for your family, and improved financial understanding. In the end, a financial plan offers a roadmap so you can navigate finances more easily.
How Do You Get Started With Financial Planning?
To get started with basic financial planning, look at your income, assets, and debts. You can subtract your debts from assets to find your net worth and then look for ways to reduce debts to boost that number. You can also consider options for increasing your income.
You’ll also need to jot down your financial goals to know what you’re working toward. That’s where a professional financial planner comes in handy so that you don’t have to figure it all out alone.
Now Make Your Financial Plan
You now have the answer to the question, “What is financial planning?” So, it’s time to start financial planning on your own or with an advisor.
If you opt to get professional help, be sure to find out what fees you’ll have to pay and make sure the person has the right qualifications. Asking around for financial planner recommendations can make the hunt easier.
For more finance tips, go ahead and check out our other posts.