Setting yourself up for the future is probably the last thing you think about when you are in your early 20s. But when you reach 28 or older (depending on the person) you start to think about your future. Let us look into some tips to safeguard your future when it comes to financial planning. What are the best ways to set up your future? Because when your life hits you (getting married or starting a family), you start to think about financial planning.
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What is Financial planning?
Most of us know that we need to save money but do we plan for it? Do we plan our finances? We don’t know what the future holds and we are sometimes faced with troubling economic times. We meet life’s surprises such as the pandemic, a lot of people lost their jobs and had financial troubles. This is when having a financial plan comes to aid.
Financial planning is a comprehensive plan, projecting many years to come. Having a comprehensive financial plan helps you eliminate debt, save for emergencies, and build funds for retirement. It is meant to safeguard your future.
You might be thinking, financial planning is only for rich people. You are mistaken. Everyone is able to plan for their future.
What does financial planning include?
It includes details about your income, expenses, investments, and life insurance.
First, let’s talk about your income. Your financial plan will be based on how much money you make every month. It will also depend on your financial goals, like what kind of life you want to have. You cannot be planning a luxurious lifestyle without considering your income. You could do more planning if you diversify your income. Also, remember to get paid what you are worth and spend less than your income.
Consider your expenses and investments too when you plan for your future. Take a look at your current situation. Where does most of your money go? How much percentage of your income is for your expenses. The lower the percentage is, the more you can save for the future.
We all know that life insurance is an essential part of financial planning. Unexpected turns of events are inevitable and failure to prepare for them can result in financial ruin. Adding a personal cover ensures that your family is protected financially. Now, most life insurance policies require a medical examination, but if you have serious medical conditions, it’s not the end because there are life insurance policies available with no medical examination. You aren’t guaranteed a no medical exam but it’s likely.
The importance of life insurance in financial planning should not be neglected. A lot of people focus on wealth creation and often neglect the element of protection. Don’t make the same mistake.
Benefits of Financial Planning
There are two types of people when it comes to financing. Someone who has a plan and someone who doesn’t. He or she saves money whenever she can. I fall into the type of planner. And here are the reasons why financial planning is beneficial.
A financial plan boosts your confidence
No one beats a person who has a plan for everything. Having a definite, written financial plan gives us measurable goals to work on. It gives us the confidence to work on our current situation and it gives us something to look forward to.
A financial plan leads to better spending habits
We all have good and bad spending habits but financial planning leads us to good ones. A Schwab survey showed that 54 percent of Americans who have a written financial plan maintain healthier money habits when it comes to saving and investing.
A financial plan helps you achieve financial security
It is almost impossible to achieve financial freedom without a decent financial plan. With a good plan, you can learn to save enough money to sustain your expenses, create an emergency fund, and save for your retirement.
Here are top tips to safeguard your future successfully
Every person`s goal is to have a stable future so let us look into these tips to do that. The future may seem afar but the earlier you plan the better.
1. Eliminate debt
To feel secure about your future, eliminating debt is the fastest way. When you are debt-free, you can sleep better and you have nothing to worry about when you wake up in the morning. We have tips here to manage credit card debt.
2. Research and create realistic goals
Goals are impossible to achieve when they are not realistic. When we set unrealistic goals, it often leads to disappointment. A great way to create realistic goals is to know where you are right now. It is often said that you cannot know where you are going when you don`t know and understand your current situation.
Here are examples of financial goals you can create as early as your 20s. You can get some tips to safeguard your future in this article too such as turning your passion into a side hustle.
3. Create a monthly budget
A financial plan will not be complete without a monthly, weekly, or daily budget. Your budget whether it`s digital or paper will be your guide to your savings, expenditures, and investment. The good thing about it is you can track your expenses, reflect on them, and know where your money is going.
4. Start an emergency fund
Life is full of surprises, and chances are it will throw punches at you. You never know what the future holds and when troubling times occur. So, you have to be ready when the time comes. Starting an emergency fund is a great way to secure your future. But to start? We have tips for you to save for an emergency.
5. Expand your financial knowledge
A wise man said, expand your financial knowledge and it will take you far on your journey.
I believe that learning more about finance is a worthy path. You can read about books like Tony Robbins or Jen Sincero. They are the most influential people in my life when it comes to financing.
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Over to You
Planning for your future is a good thing to do any time of the year. The earlier you start planning for your future the better. Don’t forget to incorporate these tips into your lifestyle and you shall secure your future. Do you have other tips to secure your future? Comment them down below!