Does financial planning pay off? The truth is, it does pay off when everything is done right, and it does also backfire if you are not well focused from the start. But the question of whether it does pay or not largely depends on several factors which this piece discusses one after another.
1. Spending behavior
Your financial life is linked directly to your spending. How you spend today determines whether you will achieve your future financial goals or not. Living within your means is very key to a bright future.
One downside of overspending is that you lose your credibility among lenders. Other serious consequences pop up if you don’t control your spending behavior. In a nutshell, you must be watchful of your expenses to live comfortably in the coming days.
2. Financial potential
How far and fast you can go financially primarily depend on your current savings, current investment, and ability to save for the future. If you want to go far and fast, you must, therefore, pay keen attention to current financial prowess.
3. Savings and investments
How you choose to invest it very crucial. You make a slight mistake, and you could be in for a rough experience for the rest of your life. When it comes to savings, for example, when planning for retirement, make sure to settle for the best retirement plan. The same applies when choosing an investment vehicle for retirement. Choose the best, don’t settle for less. You may want to consult financial professionals if you find it challenging to decide.
4. Provision for emergencies
Your financial plan is not complete if you have not included a section for emergencies. It is wrong to focus on investments and forget that emergencies can hit at any time. The best way to manage emergencies is by having a good insurance cover. That way, you can be sure that any time uncertainties arrive, your savings will remain intact.
Financial professionals are there to give a hand any time we need financial support. Talking to a certified financial expert can change your standpoint on financial planning. One grave mistake most people make when planning (which you must avoid) is consulting their friends, family members, or other unqualified individuals on financial matters. While you may pick a few worth pieces from them, only certified financial planners or advisors can point you in the right direction.
How many people financially directly depend on you? If they are people who rely on you, for example, your parents, children, make sure to factor them in your financial plan. Otherwise, as much as you try to save, it will not be possible to save for your short- and long-term goals.
7. Financial goals
How many financial goals do you have? Are they achievable? It is wise to have achievable goals. Equally, it is crucial to prioritize them. Just having goals and not knowing which ones are weightier is something you may want to avoid if serious about financial planning.
Simply align your financial goals with your financial plan. Once you do that, it will be easier to transform what looks good on the paper to something that is appealing in real life.
8. Your age
Your current age has a huge impact on where you will be financially in the coming days. While still young (in your 20s and 30s), you are in a position to take a considerable amount of risk. So the earlier you start implementing your goals, the better. Equally, your age determines how much time you have to accomplish your financial goals. This again emphasizes the importance of focusing while still young.
9. Changing culture
Modern culture is ever-changing, and while you can ignore some things, you have to welcome some. Are you ready financially to accommodate what is inevitable? For example, are you prepared to finance significant events like graduation and wedding for your children? To avoid relying on your savings when such events arrive, make sure to have a provision in your business plan that addresses them. A customizable financial plan can help you tackle new life demands without hurting your savings.
How the economy is performing should always be your concern as it can affect you positively or negatively. For example, when the economy is expanding, you may be in a position to boost your savings and focus on more financial goals. On the other hand, when the economy is contracting, you may find it appealing to focus on the most crucial goals as a way to cushion yourself from tough times ahead. For example, if you are an employer, you may want to scale down your employment rate.
11. Solvency and liquidity
Only invest in those ventures or focus on financial goals that are more likely to yield sufficient return on investment. Concentrating on anything else defeats the purpose of financial planning. This means you must be very flexible in shifting toward goals or ventures that are more appealing at any given point.
Financial planning takes into account many factors for the best possible outcome. The above factors will, in one way or the other, impact your financial planning ability. What factors primarily affect your financial planning ability? We would be happy to hear from you.