Updated: February 9, 2020
Most people think that a financial plan is only for those who already have a lot of money. That’s not true.
I believe that you actually need to have a financial plan if you want to have a lot of money. Because your wealth can only grow if you manage it properly.
I’m sure you’ve heard of stories of people who won the lottery but eventually lost all their winnings after a several months. Or once famous celebrities who are now living in poverty.
They used to have a lot of wealth. But without proper financial planning, their wealth was just temporary.
I also believe that if you don’t manage your money while it is still small, then you won’t be able to manage it when you have more. That’s why it’s important to be financially educated as early as possible.
Doing a financial plan is the backbone of proper money management. It’s a person’s blueprint on how to spend, save, and invest their wealth. And below are five powerful reasons why you should create one today.
A friend told me that he never really knows where all his salary goes. All he knows is that he’s earning a lot but he has no money in his savings account.
When you create a financial plan, you’ll have more control over where you money goes. That’s because you’ll be more aware of your expenses, and eventually make smarter spending decisions.
Peace of Mind
It’s already stressful when a family member gets sick, but not knowing how to pay the medical bills that comes after is emotional torture.
A financial plan will show you how to effectively build an emergency fund. It also allows you to have options on how to protect your income and assets, and avoid financial stress.
Standard of Living
It’s important to live a sustainable lifestyle. If your current cashflow allows you to dine out and travel often, then a financial plan will make sure that you can continue living this way.
Moreover, whatever standard of living you have now, a good financial plan will raise it slowly but surely over the years until retirement and even beyond.
Freedom from Debt
I often get messages from individuals who ask for help on how to pay off their debts. Unfortunately, most of them are at a stage where options have become very limited, and difficult choices must be made if they want to solve their debt problems.
Creating and following a financial plan will make sure that you don’t reach that point. In fact, a financial plan can help you avoid unnecessary debts in the first place.
Realizing your Dreams
I often ask people what their dreams in life are. The most common answers I get are to travel the world, to have their own business, to give their children a bright future, and to retire rich.
These dreams are not easy to achieve. It requires hard work, patience, dedication, and good financial planning. How else can you afford these goals sooner than later, but to save and invest properly.
When you’re traveling to a city you’ve never been before, common sense dictates that you plan your trip. So you do research, ask tips from friends who’ve been there, and create an itinerary.
It’s the same for your financial journey. You do research and increase your financial IQ, you can consult with a financial planner or adviser for tips, and have a financial plan to guide you.
That’s the smarter way to do it, rather than going blind and learning from trial and error, which can become costly mistakes.