Importance of Financial Planning:
Let us understand the importance of planning with this example, if you have an aim to become an investor, how would you achieve it, just jumping into the investment or first plan how to become a savvy investor and then jump. If you are smart enough, you will surely choose the second option.
First, you plan what things make you a savvy investor, and then you invest your money in the various investment options. In short, to achieve anything, you need proper planning. Likewise, to achieve
financial freedom in your early 40's you have to plan your finance.
Trap of Debt Due to Lack of Financial Planning:
Millennials, who are living in their present and spending money on unnecessary things, have their finance very poor and experiencing themselves in a huge debt. One of the common reasons behind their poor credit score is not analyzing money before spending. This blog is designed for individuals who are looking for the reasons why financial planning is so important. So, i am going to familiar them with the top 5 reasons which encourage them to plan their finances and spend wisely.
Top 5 Reasons Why You Need a Financial Plan:
• Managing Cashflow or budgeting: If you don't realize how your monthly income is going every month, then it is an indication that your spending money without planning. As this blog is not designed for criticizing you, it is for helping you, so we advise you that maintain a budget or cash flow of every month. It also stay on track towards your long term financial goals while you may achieve short term financial goals as well.
• Efficiently managing debt: As per the finance report, it is found that 1 out of 10 millennials are paying the huge debt. Their liabilities are turned into huge debt and ruin their finances and personal life. One of the most common reasons behind their debts is the lack of
financial planning. First, utilize your income; if it is get ended, then come to the borrowing options like loans, credit cards or payday loans, and so forth. It is advisable not to take a loan of more than 36% of your income.
• Invest in the right financial product: If you are a family man then it is advisable to invest in the low-risk appetite financial products like PFF, SIP, FD's, term insurance plan, where the return of the investment is guaranteed. You can also invest in the stock market if your pocket allows you to do so.
• Include savings habit in your life: It doesn't matter how much you are earning; save at least 20% from your income. Savings are significant in today's life because it's only supported in an emergency when everything will back off from you to help.
. A blueprint of your financial planning: If you don't have a road map, how would you achieve business goals in expected time. Hence, financial planning is for those who have unclear ideas or plan how to achieve long term financial goals.