Money. The five-letter word that can strike terror into the hearts of people and make them want to run for the hills and start a civilisation on a remote farm. This doesn’t have to be the case. Some of the most common questions we hear are: “what is financial planning?” and “what are the benefits of financial planning?” While they might seem a little overwhelming, we’ve got you covered on exactly what these questions mean.
Ok, but seriously, what IS financial planning?
Put simply, financial planning is all about assessing your current money situation, making a list of long-term monetary goals and implementing strategies to achieve these goals.
Financial planning is about so much more than managing your investments and savings. Saving money and reaching financial independence isn’t as simple as putting money in a separate bank account and not touching it – if it was, we would all be doing it!
Whether your financial goals are to buy a house, build a property portfolio, invest to go on a dream holiday or around retirement (no, it’s not too early!), the benefits of planning for the future and seeing a financial planner far outweigh those of trying to do things yourself.
Seeing a financial planner may feel daunting and a bit foreign if you’ve never seen one before, but a finance professional can help you manage and grow your wealth regardless of your income. Remember that financial planning is about achieving your financial goals and dreams. You wouldn’t see a podiatrist for a problem in your hands, so why talk to family and friends for financial advice?
So, let’s discuss the benefits of financial planning
Now that we have answered the question of “what is financial planning?”, it’s time to talk about the benefits of financial planning.
#1 – Financial planning helps you set and achieve your financial goals.
Studies have shown that people who are actively striving towards a goal are around 10 times more likely to succeed. That figure alone should make you want to get your finances in order. It’s important to have goals across all aspects of your life, including your finances.
Financial Planner, Luke Saltmarsh says, “Think of your goals like puzzle pieces. In your first meeting you will throw them all out on the table, and your adviser will work with you to put all the pieces of your financial future together.”
Your financial goals will allow you to enjoy life, feel less stressed and be more prepared for the unexpected. A financial professional will work with you to understand your goals and lifestyle to help you establish realistic goals for your circumstances.
#2 – Having a financial plan is a source of motivation and commitment.
Having a plan will keep you on track and accountable. It can also reduce uncertainty and provides you with a ‘why’ behind what you’re doing. Your financial advisor will likely help you set up SMART goals – Specific, Measurable, Actionable, Realistic, Timely. These will help you to stay on track.
#3 – It provides a guide for action planning and decision making.
Financial plans can encourage action toward your financial goals. Actions that are focused and coordinated on specific outcomes are a lot more effective. Many people, however, don’t know where to start when it comes to their finances. Getting started can be nerve-wracking for many reasons including stress and a fear of being judged around their financial situation. If you’ve had trouble with money in the past, you may also be hesitant to talk to someone for fear of getting burnt again. Some people may worry that they aren’t ready to make such a big financial decision and that when they speak to a financial advisor, they won’t understand the lingo the advisor is using.
All of these concerns are completely normal, and our friendly team isn’t new to these fears – they were once in your shoes! Speaking with one of our team members will provide you with clarity around your goals and the actions you need to take to reach these goals.
#4 – It provides additional emotional and mental health benefits.
Having a plan and direction for your finances takes a massive load off your shoulders and can eliminate mental stress and strain. Working towards a goal can give you a feeling of accomplishment and help you feel more optimistic about your future and where you are going. Having a financial plan can also put your mind at ease, lower stress about money-related issues and overcome any hurdles and speedbumps that come your way. According to Savology, 83% of people with a written financial plan felt better about their finances after just one year.
Sorting out one area of your life can also improve your overall health and wellbeing, giving you peace of mind and less stress about your finances.
#5 – Having a plan can help you set performance standards for yourself.
This will give you a way to measure your progress and how you are tracking to reach that goal. It will also help you to adjust your plan if something unexpected pops up. Having set goals and standards will keep you accountable and allows for self-evaluation and self-improvement.
#6 – It improves your overall financial outcomes.
The final benefit of financial planning is its ability to improve your overall financial outcomes. This may seem obvious, but it isn’t something that’s always taken into account. Having a financial plan will leave you better off with your finances in the future.
Your financial plan will and should evolve as you start to achieve your goals – that way, you always have something to work towards. It will also put you in a better position if you find yourself faced with a financial emergency and retirement.
Luke advises that the most valuable benefit of financial planning and having a financial planner is, “Having access to their ongoing advice and guidance to help you navigate all of your future changes and big decisions. This ensures that as you move through life, your financial strategy will move with you and continue to remain appropriate.”
Having a financial plan may seem like a daunting task but it’s not as scary as you might think. Our friendly team is with you every step of the way when planning your finances and will use terms we know you’ll understand.
If you’re ready to start your financial plan, get in touch with a member of our team today.