Understanding why personal financial planning is important is the first step towards a secure, financial future.
Regardless of your income, planning your personal finances alongside a financial planner will help you save for the future, prepare for a rainy day while working towards achieving your big (or small) dreams.
Before we talk about the importance of personal financial planning, let us first understand what it means.
Investopedia defines personal finance as “a terms that covers managing your money as well as saving and investing. It encompasses budgeting, banking, insurance, mortgages, investments, retirement planning, and tax and estate planning.”
Personal financial planning also looks at potential risks and life events to prepare both mentally and financially for them.
The term “personal finance” can also be used to refer to the financial planning industry and all the institutions that offer financial services to a private individual.
As Allen Lakein said: “Failing to plan is planning to fail”. This may seem like a daunting prognosis, but there is much truth in this statement, especially when it comes to financial planning.
Because there are so many predictable and unpredictable variables that can affect your finances, it’s important to have a solid financial plan in place to cushion the blow in the event of major loss, or emergency circumstances.
Below are 5 reasons why you should take personal financial planning seriously.
There are many important milestones in life which are measured according to your unique goals and dreams.
These milestones can be:
Whatever your milestone may be, planning for it is essential as it will help you meet your goals within a specific period.
Personal financial planning supports your efforts to reach your goals and dreams, while taking care of your responsibilities and the sooner you start planning, the better.
Whether we like it or not, emergency situations can arise at any time. It could be a sudden illness, an accident which causes major or minor injury, or perhaps your vehicle breaks down after years of reliable travel.
Preparing financially for the event of an emergency will make dealing with the emergency less stressful. If you are not prepared for an emergency, you create unnecessary hurdles which take you further away from reaching your goals.
Retirement is inevitable and making sure you are prepared for it is the single most important part of the personal financial planning process.
When you invest in retirement vehicles, you reap the rewards of compounding interest. This also means that the sooner you start saving for your retirement, the more comfortable your retirement will be.
A solid financial plan can help you evaluate how and where you spend your money, enabling you to cut back on unnecessary expenses and to save more rather than spending more.
It also assists in making sure you have access to cash for the smaller pleasures in life such as a dinner out with your loved ones every now and then, without having to dip into your savings. In other words, a personal financial plan helps you build a secure financial foundation while still having fun.
Financial planning helps you provide financial security for yourself and your family, while maintaining a comfortable standard of living, especially in the event of loss of income.
With an unstable economy, job loss is an unfortunate reality faced by many South Africans. However, this becomes less stressful when there is a sound financial plan in place.
Personal financial planning is one of the biggest gifts you can give to yourself and your family, but unless you have a strong background in finances, developing a good plan independently can be overwhelming.
Our financial advisors do the heavy lifting for you. We evaluate your current financial situation, gain an understanding of your goals, and needs and put together a comprehensive financial plan to help you achieve everything your heart may desire.
For assistance with your financial plan, or to find out more about the services we offer, please don’t hesitate to contact us.
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