5 things you need to know about financial planning
Women Helping Women
You’ve heard about financial planning, but what’s so important about it? Well, a good financial plan maps out where you are, where you want to be, and becomes the roadmap that helps you get from here to there. Here are five main things to understand about financial planning.
- A financial plan helps you define your goals
One of the most important pieces of a financial plan is defining your long-term goals. Maybe you want to own a second home or travel the world. Maybe you want to pay for college and retire comfortably in Napa. Or perhaps you want to ensure you never have to rely on anyone else financially again. Whatever your unique goals, your financial plan should include them.
- A financial plan helps you reach for your goals
Any financial plan worth its salt should map out how you will achieve your goals. It will consider your current net worth, your cash flow, income sources and more. Your plan will include all of your current obligations, like mortgage and insurance, and will outline specific amounts to put aside each month toward savings, college, retirement and other specific goals.
A financial plan can help you prepare for unexpected events
Good financial plans should include a cushion of extra funds that are set aside to help you pay for unexpected events—both good and bad. So, whether you decide to take your family on a trip to celebrate the end of quarantine, or you need to replace your roof, you’ll be prepared.
- A financial plan helps you stay on track toward your goals
Financial plans can help you stay on track toward your goals in multiple ways. First, they give you a framework for making decisions. For example, if you are considering a major purchase not in your plan, looking at it in the context of how it could affect your plan can be quite helpful. If it has no impact, you may decide to do it, but if it might delay your progress, you have the opportunity to weigh your decision and determine if you think the tradeoff is worth it or not.
Second, financial plans give you a benchmark to measure against. As such, they should be reviewed regularly in order to track your progress toward your goals. In fact, sometimes, just knowing that things are being looked at regularly can motivate you to stay on the straight and narrow as well.
- Financial plans should evolve
A good financial plan should not be static, but a living document that evolves as your needs and life changes over time. During your regular reviews, you should be considering not only your progress and investment performance, but how your life may have changed. Perhaps you had another child or got a new job, or maybe your mother passed away. Or perhaps you’ve decided that you don’t really want that vacation home anymore, but would rather upgrade your existing home. There are any number of things that may change from year to year, so it’s important to communicate these during your review.
When done well, with the assistance of a professional, financial planning should help you to reduce financial stress today, while helping you achieve your goals for tomorrow.
Gasber Financial is happy to create a financial plan for you or to review and update your existing financial plan in order to help ensure your future is everything you want it to be.