Money - whether we like it or not - makes the world go round, and how we manage that money can mean the difference between struggle and comfort and between comfort and prosperity.
Whether you think you are good with money or not, there are huge benefits to be had from structured personal financial planning.
Here are my top 8 reasons why personal financial planning is important:
1. Plan To Get Out Of Debt
If there’s one financial move that will change your life for the better, it’s getting out of debt. But figuring out how to climb that mountain can feel overwhelming and even impossible. Luckily, financial planning can be the lifeline you need to get back in the black.
Not only can good financial planning help you claw your way out of your existing debts, it also lends itself to good financial decisions that will keep you out of other major debts in the future. Planning ahead and putting money away into savings will also save you from debt next time you need to buy a car or pay an unexpected bill.
2. Plan To Make Money
Planning not only helps with paying back money but with making it too. The wealthiest people in the world spend a great deal of time planning how to manage their money, and they are proof that it pays off!
Writing up a plan that lays out your savings goals is a great place to start if you want to put cash away for a rainy day - but planning your personal finances can also help if you’re interested in investing.
3. Plan Your Cash Flow
Planning your personal finances is not only about forward thinking, but also about tracking, monitoring, and making adjustments to your budget.
You can increase your weekly and monthly cash flow through good financial planning. By taking note of your spending patterns and expenses, you’ll start to get a better idea of where your money is going, and careful budgeting will help free up more of your money after each paycheck.
4. Plan For A Better Standard of Living
It’s very easy to get caught in a paycheck-to-paycheck cycle where there’s never enough left after bills to actually enjoy some “nice-to-haves.” By sitting down to plan out your finances, you may find areas where money can be saved, and that little bit extra can either go into savings or toward a better quality of life for you and your family. More treats, less struggle street? Sounds like a win to me.
5. Plan For Your Family’s Security
What will your family do if one of the main breadwinners loses their job or is unable to work for a period of time? Planning your personal finances may not seem like a ‘fun’ thing to do, but it could save you a whole lot of heartache in the future if something unexpected crops up.
Write up an emergency financial plan and factor in how much you’ll need to put away to cover a month of lost wages, or the cost of an unexpected illness. It’s not a pleasant thing to consider, but if it means security and peace of mind for your family, it will be well worth the effort.
6. Plan For Your Retirement
If there’s one period of your life you should be planning your personal finances for it’s your retirement. Gathering a big enough nest egg for your twilight years is a major financial project, yet people often leave this major piece of planning too late - or don’t even go about it at all. Writing down your income, savings, and investment plans is a hugely important step toward keeping yourself comfortable later in life.
7. Plan Your Savings
Even someone on a $150,000 salary can find themselves without a dime in savings if they haven’t put some effort into planning where their income is directed.
One of the best ways to plan your savings is to take them right out of your own hands. Establishing automatic payments so your paycheck is automatically split into savings, debt repayments and bill money is a great way to ensure that your money doesn’t grow wings and fly away before you’ve had a chance to stow it away somewhere safe.
8. Plan To Be In Control
If there’s one overarching reason why personal financial planning is important, it’s this: control. Writing down your financial goals, taking the time to better understand your finances and mapping out a route to more financial stability or prosperity is one of the most satisfying and effective ways to gain a sense of control in your life.
Planning Your Personal Finances With BOSS
If you can see why personal financial planning is important but don’t know where to start, take a look at The Complete Budget Planner - a tool I’ve developed to help you set your financial goals, create monthly budgets and coordinate debt payments and savings plans.