4 Important Reasons You Should Start Financial Planning Today
Financial planning is not a particularly exciting topic. It’s not something that you want to spend a lot of time thinking about, especially when you are young. However, it is something that everyone should be doing and you should make time to start today.
What Is Financial Planning?
In basic terms, financial planning is something you do every day. It is simply the assessment of how much money is needed for a specific event and how you will collect the money together.
For example, if you want a new car you will need a set amount of money. You can save the money, borrow it, or even lease the car. These are all examples of financial planning.
However, this is small scale. The real motivation behind financial planning should be to create a nest egg. You are never too young to start.
All you have to do is look at what you have coming in every month and what your outgoings are. Combine this with a knowledge of how much you need to put aside each month and you have a financial plan for the future.
Of course, to accurately assess what you need for the future and how much you need to be putting away, it is a good idea to talk to a financial planning expert.
There are four great reasons you should be starting today.
- You Save Less Per Month
When creating a financial fund to be used in the future the sooner you start the better. This is thanks to the joys of compound interest. While it is obvious that saving $100 per month for forty years is going to give you a larger sum than saving the same amount for twenty years, what may surprise you is that you can achieve the same fund by contributing approximately $30 per month for forty years as you can doing $100 for twenty years.
The reason is compound interest which allows you to earn interest on your interest.
In short, start saving a small amount today as your first step in financial planning.
- Reduced Stress
Spending a few moments on financial planning means you will be able to build a reserve fund. This means you can handle the emergencies that life throws at you, whether it’s needing a car, replacing a dishwasher, or even losing your job.
Having backup funds means you don’t have to worry about these things and that means you’ll have less stress. As chronic stress is related to a variety of age-related diseases, this is definitely a good thing.
- Flexibility In Life
Having your own funds behind you doesn’t just cover you if things take an unexpected turn in life. It also gives you the freedom to decide to make a change.
Financial planning leads to financial security which gives you the freedom to follow your own path.
- Better Life Quality In Retirement
Finally, starting your financial planning today means you will have enough money in retirement to enjoy a high-quality life. While saving may seem like a chore today, you will appreciate it as you reach retirement and are able to do a variety of things, ensuring you still lead a fulfilling and active life.