With so many daily demands pulling at your personal finances, it is sometimes hard to step back, taking-in the big picture. Yet despite the importance of addressing immediate needs, it is nonetheless vital to account for your long-range financial vision, in addition to day-to-day concerns.
Financial planning serves several essential functions, helping you manage income and cash flow, without losing sight of your monetary goals. Valuable for reaching milestones visible on the immediate horizon, as well as financial matters impacting your distant future, effective planning is an essential feature of comprehensive financial management.
Financial Forecasting Keeps you Focused
Preparing for your financial future keeps you moving toward your goals. That’s not to say you’ll always steer clear of unexpected events you didn’t plan for, but taking a proactive approach gives you a better chance of achieving your personal financial priorities. Some milestones to consider as your financial plans come-together include the following:
Home Ownership – Home ownership isn’t for everyone. Not only does owning a house call for substantial financial investment, but maintaining and improving residential property can feel like a full-time job. There are financial benefits to buying, as opposed to renting, including tax breaks and equity you build as property values increase and payments reduce outstanding principal. But if you are not committed to the idea of owning a house, you’re financial plans should reflect it. On the other hand, if it is a family priority, you should start planning for a house purchase as soon as you are able.
Once committed to buying a house, saving for a down payment is your first order of business. A dedicated savings account, cut-off from your general financial flow, is a good spot to accumulate funds for a house down payment. Before looking at homes, consult with a banker and learn about loans online. Not only does the process reinforce your understanding about lending and economics, but exploring finance options ahead of time also defines spending limits, illustrating exactly what you can afford.
Family Holidays – Although financial planning is often associated with long-range goals and big-ticket buys, preparing in advance also helps firm-up funding for less lofty goals. Family travel and holidays, for instance, can sneak up on your budget, leaving you short of money when you need it most. A savings plan ensures you have resources available for travel or holiday entertaining, enabling you to pay as you go, rather than amassing deep holiday debt.
Education expenses – The cost of private education and post-secondary schooling can weigh heavily on family budgets – particularly when financial plans fail to account for the cost of education. Without resources at hand, the only way to pay for school is amassing loan debt. And while a manageable balance is to be expected, carrying a substantial student debt can prove to be an obstacle, preventing you from moving forward with other financial plans.
Retirement – Perhaps more than any other aspect of personal finance, planning for retirement ensures lifelong financial security. Without a strategy for success, you may run out of earning years before your retirement is funded. It is never too late to start saving and with luck on your side you may be able to make-up time, accelerating savings later in life. But there is no substitute for paying early attention to your retirement needs, giving investments time to grow.
Retirement planning considers wide-ranging financial concerns, such as age, income, risk tolerance, personal spending levels and the state of your pension. Under the guidance of an experienced financial representative, retirement planning gives you goals to work toward and actionable ways to make the most of your retirement contributions.
Persistent spending demands sometimes make it hard to keep up with daily needs, much less look into the financial future. As hard as it is to pull yourself from the present to build a forward-looking foundation, planning helps you anticipate and prepare for extraordinary financial circumstances – keeping you focused on your financial priorities. A well-articulate plan also has the power to rein-in careless spending, in favor of working toward specific goals. From holiday costs to education expenses, use your master plan to make the most of available resources and fund your future.