The future is unpredictable. No matter how hard we try, you cannot really predict what is in store for you in the times to come. However, with solid financial planning, you will be able to prepare yourself for it to the best of your abilities.
What exactly is financial planning? Financial planning is a strategy to achieve your life's goals, desires and objectives through meticulous management of your finances. Alan Lakein famously said, "Failing to plan is planning to fail." Thus, it is critical that you need to plan your finances better for a secure future.
What would you need to prepare in order to achieve proper financial planning? Financial planning is about approaching money in a step-by-step way. It helps you to create a roadmap that plans out and allows you to achieve your financial goals. It should be clear that financial planning isn’t just for those with a high net worth. Anyone can benefit from creating a financial plan for themselves. Being in control of your income, expenses, and investments helps you manage your money better and more effectively achieve your goals.
With today’s online services, it’s easier and more accessible than ever.
It’s important to keep in mind that financial planning is an ongoing process. You can’t simply make a plan and stick to it for the rest of your life. Things change, and your financial plan will need adapting and updating as they do.
Your financial plan will also need to be highly customized based on your risk tolerance, future expectations, and family situation.
Today, we’ll be sharing a few ways you can achieve financial planning success.
1. Defining your financial objectives and goals
The goals and objectives will be the guide to the financial plan and should provide a roadmap for your financial future. They should contain the following features:
- Quantifiable and achievable
- Clear and have a defined timeframe
- Separate your needs from your wants
All these objectives and goals should be shared and documented with your financial adviser to assist you measure progress. They should also be reviewed periodically to capture changing circumstances and to ensure they remain relevant.
2. Gathering your financial and personal information
The financial planning process and its success will depend on the quality and clarity of the information communicated to your adviser. Your adviser will complete a detailed financial fact-find to capture all relevant information in relation to your finances. This will include:
- Income and expenditure
- Assets and liabilities
- Risk attitude, tolerance and capacity
3. Analysing your financial and personal information
Using the information given in step 2, you or your financial advisor will be able to produce a report that reflects your current financial profile. The following ratios are produced to improve your understanding of your financial circumstances and to pinpoint areas of strength or weakness:
- Solvency Ratio
- Savings Ratio
- Liquidity Ratio
- Debt Service Ratio
A quick note that financial planning is a dynamic on-going process that requires continuous monitoring. Review of the actions recommended in the plan should take place regularly, and the goals should be reviewed annually to take account of a change in income, asset values, business or family circumstances.
Now that you understand how you can achieve financial success, here are a few ways proper financial planning can help you.
1. Be better prepared for sudden expenses
Unexpected expenses can pop up at a moment’s notice. It might be your car suddenly breaking down and needing an expensive part. There may be parts of your home which need fixing. Financial planning allows you to take inventory of these risks in your life and start preparing for them, so you aren’t caught off guard. Good financial planning includes being aware of these potential costs and setting some money aside each month to pay for them. That way, you won’t be completely caught off-guard and left with a huge bill.
2. A financial plan can jumpstart your savings
The most common reason cited for not having a plan is "I don't have enough money." This is a misconception. Planning, even in small steps, doesn't take large sums of money to start. In fact, financial planning can have a profound impact on lower-income households by helping people improve their saving and budgeting habits. A written plan helps savers prioritize their goals and, as mentioned earlier, provides a way to gauge success.
3. A financial plan ensures the right investment strategy and portfolio
Your financial plan can give you the full lay of the land: You'll know what your goals are, how much time you have to reach them, and how comfortable you are with risk. Once you have a comprehensive view, you can figure out how to reach each individual goal.
That will involve selecting the correct investment tool; for emergencies and unfortunate incidences, short term goals as well as setting aside money you'll need in the long term. With your financial plan as a roadmap, you'll be able to make thoughtful investing decisions—instead of heading out without a sense of direction and just hoping for the best.
4. Create peace of mind
Living paycheck to paycheck is stressful. By using financial planning to create a “rainy day fund,” you can save money in case you’re laid off from your job or become unable to work. Knowing that you’ve got a way to pay for rent and food for at least a month or two without a job will make sure that you’re not left scrambling if the worst happens.
5. Build wealth
You may want wish to create a better standard of living for yourself and loved ones, such upgrading to a larger house, buying a new car, or building generational wealth to leave to your children.Aiming for something great certainly requires financial strategy and dedication for it to happen.
If you have financial planning which follows a properly defined and documented process, this will give the greatest chance of a successful outcome. It would be right to say that financial planning ensures that you are in complete control of your finances, incomes, liabilities, with clear strategy at different stages of your life.
A financial expert cannot guarantee your financial abundance. But with proper financial analysis and planning, coupled with your right mindset and discipline, financial security and financial abundance becomes possible.
We hope you enjoyed the article.
At SK i-Wealth, we offer a full financial service solution for individuals and companies, including retirement planning services. Our firm’s comprehensive wealth platform and experience supports a team of Financial Integrators with the resources they need to deliver integrated financial solutions according to your needs.