Why You Should Have A Financial Plan.
How often have you read that the first step in getting control over your financial situation is to “Create a Personal Financial Plan?”
or “Most people don’t plan to fail; they just fail to plan”.
But just what is a Personal Financial Plan?
You would not go on a long journey, in unknown territory, without a map. Chances are you would take many wrong turns, add unnecessary costs, may break down with no alternative plan and may never arrive a tyour destination. Well, by not having a plan for your financial future you are doing just that!
A Financial Plan ties up your finances with where you want to be in life.
It is a logical process that covers your day-to-day cash-flow, saving, investments, life and disability cover, retirement and estate planning-now and in the future.
A plan helps you decide on how best to allocate your resources towards attaining your goals. It keeps you on track-checking how you are progressing towards your goals and how best to deal with any deviations.
It puts your dreams into perspective by reducing them to Rands and Cents.
You may think of the process as helping you to answer three straightforward questions:
Financial Planning essentially consists of setting goals and laying out your financial life in a way that you can realize these goals.
A Three - Legged Stool
Most people have different financial priorities during various stages of their lives. Regardless of your age or current life stage, you need a plan. A balanced financial plan is like a three-legged stool; remove one of the legs and the stool teeters unsteadily and may crash, taking you with it.
The most important aspects of financial planning can be placed into three broad categories, which are the three legs of your financial planning stool:
Start planning as soon as you can.
Don’t delay your financial planning. People who save or invest small amounts of money early, and often, tend to do better than those who wait until later in life.
Similarly, by developing good financial planning habits such as saving, budgeting, investing and regularly reviewing your finances early in life, you will be better prepared to meet life changes and handle emergencies.