Planning finances has been amongst the top rated ‘toughest jobs’ of all times. People ignore till the last moment planning their finances and then lightning struck and it all gets burned. Before any such extreme situation arises, it is better that you take hold of your money and plan things according to your long-term goals.
Situations change, income changes, expenses change but what remains is expectations and desires. The more materialistic the desire is the more money it will ask for. Hence, there is no point that you do not plan your finances as per your present and future needs and goals.
If you drive a hatchback today, you would want an SUV or sedan 3 years down the line or if you live in a 2-bhk flat right now, you would want and need a bigger home as the family grows. All these things come for a handsome amount of money which if not planned for today, will become very difficult to manage tomorrow. Desires do not subside; they only grow hence we need to look for a plan which will make the money grow over the due course of time.
Here we are with 5 vital reasons why you should plan your finances, have a look;
- A small loss today, bigger effect tomorrow
When you face a small loss, most of the times it goes unnoticed. People generally do not pay attention to the small losses and where their money is flowing it the amount is not too big. Rather, every person should be concerned about every penny spent. Have you made a meaningful purchase or did it just go waste on something which could have been avoided?
The money you spent today on something useless could have been used in investing and building wealth or saving for your emergency funds, etc.
- Goal setting is very important
Be it a long-term goal or short-term goal, setting your goals is very important and crucial to your financial health. In order to sustain life, you need to keep a balance between your income and expenses. Even if you feel today that you are earning enough, think about your future, think about the growing individual and family needs, inflation and other factors. Think about how are you going to plan your savings and investments. Hand to mouth will not sustain, there will come a time when you will retire, then what?
Hence, in order to take care of all such times, planning and goal setting is very important.
You have to plan your savings across several buckets like education, marriage, children, retirement, home, car, vacation, etc but most importantly you need to save the emergency funds. ideal emergency fund accounts for 3-6 months salary plus the fund used in the last emergency that occurred in your family.
- Budgeting is essential to check what comes and goes out
Most of us fail to manage and maintain a budget. Even if we make one as a new year resolution, like most other, this resolution also fades away with time. When asked, most millennials do not have an account for what comes in and what goes out at what time as far as money is concerned? This will not do in the long-run. As mentioned in the second point, the sustainable plan is essential hence budgeting is essential.
Make sure the thin red line is not crossed at any time of life.
- For a motivation to grow
Having a financial plan makes us spend cautiously which in turn results in better savings and money to be invested. When the invested money grows, it feels like an achievement. And why not, after all the effort you had put in selection of funds, scrutinizing and analyzing the wide variety of options and finally landing on to the right one has finally paid off.
This success works as a motivation to save more, invest more and grow more. Building wealth is not a day’s game, neither does it work in a week or month. It takes years of consistency and dedication to build the wealth of your dreams, just stick to your plan.
- Investing in the right plan
Having a financial plan serves as an aid in so many aspects one of which is deciding on the right investment plan. There are plenty of investment options available in the market which are easily accessible to the investor, it is important that you analyze all these options and choose the one which is best suitable. Having a financial plan will keep you aware of the cash inflows and outflows which will help you in selecting the right plan.
If you feel that making a lump sum investment will shake your family budget, go for a SIP method of investment. If taking an 80C benefit is your primary goal, you can go for ELSS funds which provide a benefit under the 80C section as well as reward you with great returns.
Whatever your goal is, look at your financial plan for an indication and answer. A successful investor can never work without a proper and sustainable financial plan. Remember, it is not just today you need to think of, it is a lifetime which needs to be planned. Financial freedom is crucial to your physical as well as mental health, now and then!