For many people with sustainable livelihoods, having a solid financial plan is becoming increasingly crucial. Indeed, financial planning isn’t just for the wealthy or those approaching retirement – it’s for everyone who wants financial stability. However, it is concerning that 11.5 million residents in the UK have less than 100 GBP in their savings accounts, indicating the need for more awareness of financial planning. Here are three compelling reasons why this practice is necessary.
It helps you set clear financial goals
One of the key benefits of financial planning is allowing you to set critical money goals and objectives for yourself. Some of these are buying a house, starting a family, saving for education, or retiring comfortably on a good income. These goals become the roadmap for your financial journey. When you set these goals, it is important to remain committed to the cause while making the necessary adjustments to reach them. Daily expenses and monthly expenditure burdens can throw your long-term financial plan off course. However, you can gain direction and purpose with specific and measurable targets. With this roadmap, you can prioritise your spending, allocate resources appropriately, and make informed choices that align with your objectives. The clarity of these goals does more than guide your planning process. Instead, it brings you closer to your financial independence dreams.
Protects your loved ones
Death is inevitable, which explains why you must ensure your loved ones are cared for in your absence. The financial protection you offer them in the event of your untimely death can go a long way to ensure stability until they can fend for themselves. Getting a life insurance policy will be immensely helpful if you have dependents, such as a spouse, children, or ageing parents. The benefit they will receive from this policy can help cover essential expenses like mortgage payments, educational costs, and even funeral expenses. It’s understandable why people feel apprehensive about the uncomfortable reality of death. However, knowing more about life insurance will grant you the calmness you need knowing that your loved ones are financially protected.
Builds a solid safety net
Aside from helping you plan for your loved ones, financial planning also helps build a solid safety net for you. Life’s surprises can have a significant impact on your finances. How well you plan for such unforeseen circumstances will save you from inconveniences. Planning gives you a solid safety net to fall back on. What happens if you have 100 GBP or less in your savings account? From medical emergencies to job loss or unforeseen car or home repairs, it is crucial to equip yourself to weather these storms. Financial planning enables you to create an emergency fund, an easily accessible pool of savings for unplanned expenses. This fund is a reliable cushion that reduces the need to rely on credit cards or loans in challenging times. The goal is to stop you from falling into a cycle of debt while ensuring your financial resilience. Having that assurance of a well-stocked emergency fund helps alleviate stress and gives you a sense of security.