Is Financial Planning a Viable Option for Regular Income Earners?
by Arina Smith Financial Planning 06 June 2018
Whenever most people hear the term ‘financial planning’, their minds immediately go to the condition of their bank accounts and they figure that it is not for them. You make only enough to meet your financial obligations and hardly have anything left over that can fit into any plan.
However, if you think about it, you plan your finances every day. Even when it seems like your bank account is headed to the financial ICU, you do some extreme planning. That is how you figure out how much goes to the mortgage, how much to car payments, food, entertainment, and other domestic obligations.
You do not need Rockefeller-like wealth to benefit from financial planning. All you need is to have a steady stream of income. If you are on a salary, you are set to go. What you get from financial planning is:
- Reduced stress about money issues.
- Support for your family’s daily needs.
- Saving some money for your retirement.
How does planning your finances help you?
Financial planning measures your current finances against your long-term financial goals. You can get a digital financial planner by typing the best software on your search bar. A financial planner will want to know how much you have now and how much you need in order to achieve your future goals.
To ably plan your finances, you need to go through these phases:
2. Lay out your goals :
Goals like purchasing a home, starting a family, buying a car, starting a business, and any other goals you might have should be mapped out. You also need to figure out long-term goals like retirement and how much you would like to put aside for that.
3. What is your financial report like?
Factor in how much money you are worth at present, taking into account your cash, investments, as well as your debts. If you can keep track of your expenses, do so. Have some data on what you spend your money on and how much you save or borrow. If you have a clear picture of where your money goes, you will be in a better position to stop up any holes that it falls in.
4. Consolidate it :
Put your expenditure and your earnings side by side. However bad it looks, don’t worry; at least you are starting somewhere.
5. Come with a plan :
Your plan should include short, medium and long-term goals. This calls for a budget. You can no longer just spend on a whim; not if you want to meet your goals. If you have any debts; credit card or high-interest debts like bank loans, think about reducing those first. That would be a great medium-term plan to have.
6. Make your plan active :
Once you have made a budget, make sure you stick to it. Get to work on reducing your debt by a set margin per month and stay faithful to that plan. If you stick to short-term goals, you come close to meeting your long-term ones.
Be careful with life events like weddings and emergency health situations. These often come from sources outside of you and it isn’t much you can do about them. Whenever a life event occurs and you have to part with a few quid, update your financial plan.
If you feel you need an expert to help you with your financial planning, you can find all the help you need online by checking out best software and get hooked up with a digital financial planner who can offer you some much-needed insights.