Talking about managing your finances can be quite intimidating. Generally, this dread can result from a lack of knowledge, aid, and a comprehensive picture of your financial future. Well, this is where financial planning takes center stage.
A financial plan encourages you to create your roadmap for financial success. This scheme includes effective strategies and a timeframe to achieve your targets. It also lays down your stream of income, savings, investments, debt, insurance, and other aspects of your current financial situation.
The Significance Of Financial Planning
Some may tell you that you’re young, too old, or aren’t wealthy enough to set a financial plan. Nonetheless, keep in mind that starting a financial plan is for everyone. It’s a way to help you gain financial literacy and ultimately, monetary freedom and abundance.
On top of this, financial planning can help you build a safety net for retirement, college funds, buying a car, or a house. Also, through this scheme, you can maximize the time that your money can grow and the assets that you have. In fact, the sooner you put together a financial plan and set aside personal funds for long-term goals, the more financially secure you’ll become. Consequently, this can help you achieve the post-retirement lifestyle that you want.
When Is The Right Time To Start Financial Planning?
People will always say that “now” is the right time to start financial planning. But aside from that, there are other situations that would tell you that it is indeed the perfect time to start.
1. Upon Your First Salary
It can be exciting to start purchasing things from your wish list when you’re already earning. However, it’s also important not only to think about the present but the future as well.
Upon your first salary, you can start thinking about how you can best maximize your earnings to build a financial buffer for the future. This is also the perfect time to start learning about handling your personal finances as this is the time that you start earning and sustaining yourself.
Likewise, because of all the expenses involved in living independently, you may be more interested in building a realistic and smart financial plan. You wouldn’t want all your hard work to go in vain. You need to take advantage of the time and assets that you have while you’re young, healthy, and steadily earning.
Moreover, with a lot of affordable, credible online services, planning for your future has never been this accessible and doable. For instance, you can work with a Robo-advisor that can help you manage your finances, introduce investment channels, and help create a strong, diversified financial portfolio.
2. When You’re Already Debt Free
After paying all of your debts, you may think what’s next? Keep in mind that it can become too easy to go back to the cycle of overspending if you don’t have a financial plan. Considering this, it’s crucial to begin planning and managing your finances by this time.
When you’re already debt-free, you can start reorganizing your financial life. For instance, if you’ve paid off your credit card debt, set up your bills in auto-pay mode so as not to miss any payments. You can also start tracking your expenses and see where you could spend less. This will help you identify lifestyle habits to cut down or avoid.
When you’re finally debt-free, use that time to get serious in creating your emergency fund. An emergency fund is a stash of money that you place aside to cover any unpredictable, urgent, and important expenses. This reduces the stress and burden of having to look for money or getting into debt again, especially if you’re self-employed, the household breadwinner, or if you don’t have family members to count on.
Considering this, increase your contributions per month to ensure that you have a safety net that could cover your expenses for a minimum of six months. Make sure that you don’t go back into debt and only use your credit card when it’s really necessary.
3. During An Economic Recession
Your financial plan must be built around the reality that unprecedented events are possible. Such occurrences may include market downfalls, inflation due to economic recessions, and even a pandemic.
Moreover, you can financially thrive during a recession by maximizing the right opportunities. To guide you, work with your financial advisor to help you make sound decisions and identify smart investments to add to your portfolio.
Additionally, recessions can be an excellent time to strengthen your financial portfolio by purchasing stocks from reputable, established businesses at discounted prices. Once the market goes back up, you will be enjoying more gains from your investments.
Becoming financially literate starts with learning how to plan and manage your money. With financial planning, you can gain insight and experience on how to maximize the resources and assets that you currently have. Considering all these, start planning now and witness how your money can grow throughout the years. Remember, time is always on your side.