Why Personal Financial Planning? Planning your financial future could not be more important if you are planning on raising a family or growing old with your significant other. Here are 5 things you should know about Personal Financial Planning which would help you and your family in the future. 1. Understanding Your Financial Goals 2. What You Need to Know about Insurance Planning 3. Save or Invest 4. Retirement Planning 5. College Planning
1) Define your financial goals
The first step in planning for your family’s financial future is to define exactly what you want. Do you want to retire early? How much do you want to pay for your child’s college education? This sort of self-examination helps everyone in your family know where they stand financially, which can help prevent some potential conflicts down the road. Your goals will change over time as you grow older and your needs change, so be sure to review them regularly.
2) Make sure you have enough insurance coverage
It’s important to make sure you have adequate insurance coverage when it comes to providing for your family’s financial future. If you don’t already have a comprehensive insurance plan in place, take time to sit down and review it with your spouse or partner. Making sure that all bases are covered can help ensure that both you and your family will be provided for in times of need. And with more Americans than ever approaching retirement age, ensuring that you have enough insurance coverage is more important than ever before.
3) Save for the future
When you think about planning for your future, don’t let thoughts of retirement stop you from also thinking ahead. The sooner you start saving and investing money, while still in your 20s and 30s, for example, to fund goals like college tuition or buying a home in a few years, rather than 10 or 15 years down the road, can help you reach those goals faster. Start small by setting up an automatic savings plan that transfers a certain amount of money from each paycheck into an investment account.
4) Do you really need that?
Unless you have your family’s full financial picture, it’s hard to know if you need that new iPhone or a new TV. Before making any big purchase (i.e., anything over $100), sit down and ask yourself these five questions: 1) Do I need it? 2) Can I afford it? 3) Is there a more cost-effective alternative? 4) When will I use it/do I anticipate using it soon? 5) Will my life change significantly before I can use it? If you answer no to any of these questions, just say no.
5) Debt Repayment
Paying off your debts early will help save you a significant amount of money in interest. By paying off your highest-interest debt first, you can use that extra cash to pay down your next highest-interest debt, and so on. To be sure, paying off student loans or credit card debt isn’t a bad thing; they have higher interest rates than many other forms of debt.
6) Retirement Planning
One of the most important financial decisions you will make in planning for your retirement. If you don’t plan ahead, there is a real risk that your finances may not be sufficient to ensure a comfortable retirement and quality of life. Therefore, it is important to have a plan in place that details how you are going to accumulate and manage your money so that you can retire on time or early.
Depending on what stage you are at in your career, different steps need to be taken as well as specific savings goals. These depend upon your age and lifestyle expectations once retired. While investing might play an important role, there needs to be an appropriate balance between saving and spending; after all, you cannot spend what you haven’t saved! However difficult it might seem while working full-time with children at home, having such a written financial plan with family members should help get everyone clear about their future needs when retired.
7) The power of investing
Investing is one of two personal finance strategies that create long-term wealth. If you save and invest, your money has a chance to grow. If you spend and borrow, it will shrink or even disappear completely. In fact, personal finance guru Dave Ramsey says that it’s not how much money you make or how well you handle your money on a daily basis—it’s whether or not you save and invest over time that determines your financial future. That said, saving alone isn’t enough; if you want to see real results from your hard work, you have to learn how to invest.