We know everyone is currently in their “new year, new me” mindset, so we thought it would be a great time to talk a bit about financial planning and the importance of it, no matter what stage you are in your life.
A financial plan allows you to determine your financial situation at a given moment. It should include looking at all your assets and liabilities, calculating your net worth, establishing what your goals are, and what methods you are going to employ to achieve them. This means taking into consideration all your assets – how much you get paid, what’s in your savings accounts, investments, what’s in your retirement fund – as well as your liabilities including loans, credit cards, and other personal debt. Don’t forget to include expenses like your mortgage or rent, plus monthly utility bills and other monthly expenses. The snapshot should also factor in what your goals are and what you’ll need to accomplish in order to get there. This could include retirement planning, investment strategies and tax planning.
So you might be thinking, I don’t need to worry about my financial plan, I have plenty of time to figure that out! However, saving early gives you the ability to build wealth faster as compound interest and time works in your favour! Plus, establishing good savings habits early on in life will set the stage for an improved ability to achieve financial goals and independence. It’s important to do so to avoid the pitfalls of being over leveraged with debt obligations that may have high borrowing costs.
Setting financial goals provides a road map and plan to build wealth and places you on the path for financial independence. It is critical to establish achievable time horizons so that you can plan your financial milestones properly. The key to success really is a proper plan!
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