The answer is a straight “Yes”. In today’s world, where the minutest expenses too are hurting pockets, each of us must have a financial plan. It is crucial that we not only earn smartly. Still, our expenditures and savings must also be SMART, i.e., specific, measurable, achievable, realistic & time-bound.
You must plan your finances in a way that they help you survive in the next 10 years. It keeps you financially strong during the most unforeseen circumstances, without any dependency on money loans.
To do this, you need to understand the term financial planning in a more detailed manner. Also, know the significance it holds in making futures economically bright.
What is Financial Planning?
Financial planning, when defined in simple terms, means that you plan all the expenditures and savings of your life prior in a way that is practical and peaceful for you in the longer run. From organising current expenses to future savings, you give your goals a structure that doesn’t seem burdensome.
Financial planning is a key concept in every working professional’s life, irrespective of whatever kind of job he does. Unfortunately, this concept is overlooked, and this is the major reason that pushes a working professional to take out payday loans from a direct lenderdue to financial instability.
A working professional can create financial plans of three types – short-term, medium-term and long-term. Companies to design their financial goals for 1 year, and 5 years majorly use these three plans and over 5 years respectively. This structure can be adapted for personal financial planning too.
What is the Purpose of Financial Planning?
The major purpose of financial planning is to help you achieve your bigger goals. For instance, you want to buy a new house in the next 5 years. Having a medium-term financial plan will help you organise your expenses and savings in a manner that will prepare you to manage funds for your home.
To make this context more interesting, we’ll tell you a story. It will help you understand how purposeful financial planning can serve an individual in organising his earnings too.
McCormick, a renowned professor at Harvard University, conducted a long survey on 100 students of this University. He asked two questions:
- Do you have goals?
- Do you have any plans drafted for your goals?
They then segregated the students into 3 groups based on their written answers.
Group A, with no goals and no drafted plans, earned less. The second group with a planned vision earned two times more. On the other hand, the third group with proper written and well-structured plans earned 10 times more than the two groups.
This concludes that when an individual plans his goals, it serves him the purpose for a there longer run.
Financial planning also plays a significant role in keeping oneself ready with a retirement plan. At the same time, some resources offer money loans for people on benefitsor loans for pensioners. It is always best to keep a retirement plan ready than dependingz upon these loans. However, if need be, you can rely on trusted direct money lenders in the UK to fulfil this purpose.
In a nutshell, a financial plan will help you cut down your unwanted expenses and organize your future expenses. It also determines the scope of investments you can make to rotate your income.
What is a Good Way to come up with a Financial Plan?
Online Tools: Technology is dominating every sector – even finance. Hundreds of applications are designed to make financial planning an easy approach for tech-savvy individuals. These applications help you plan your finances smoothly and seamlessly, from budget analysing to managing expenditures. Moreover, several online financial planning tools also help you structure your finances. It provides you with practical insights on how you need to plan your day-to-day expenses in order to save smartly.
Financial Advisory: If you are a person who believes that expert guidance is more reliable than online tools, seek out finance experts to create a financial plan. Financial advisors help professionals understand where to invest, how to spend, the corrective measures required for bigger savings and much more.
Counselling From Closed Ones: If you are not very keen to reach out for help from financial advisors, then take suggestions and insights from your close ones. These are superior and wiser than you in managing their expenses. Often retired senior citizens have a great sense of providing resourceful advice on these matters.
Search the Web: Last but not least, you will find numerous authentic articles on the web. These detail everything about financial planning and the measures you need to take while creating one. These articles will help you get sound advice articulated from experts in the industry.
To make this search easier for you, here are some authentic tips and tricks we have written for you, taking references from trusted finance bloggers and advisors.
What is The Best Financial Advice for Young Professionals?
- Follow the 70-20-10 Budgeting Rule: This is nothing but a guideline that distributes your income in three primary categories – spend, save and donate. This means that 70% of your income must be utilised for your expenditures like bill payments, grocery purchases, taxation etc. The following 20% is to be saved or invested in any source that rotates your money back to you with profits. The remaining 10% must be used to donate to a cause or, if needed, to clear your debts.
- Build an Emergency Fund: If you follow the above rule, ensure that you keep a specific percentage of your savings in an emergency fund. In the case that you are unable to assign a specific amount for this fund, the ideal option for you is to apply for payday loans from direct lenders in the UK to meet your emergency needs.
- Get Your Risks Covered: Human life and money are both prone to risks. These risks not only cause a huge loss of income but also push you or your dependents to financial instability or debts. Ensure that you apply for health coverages, life insurance, property insurance etc., to keep you covered during tough situations.
Now that you know all about financial planning, why sit still thinking? Get your financial plan ready right away and enjoy your savings the smart way.
