Most people are too caught up living in the moment that they overlook one important part of money management – financial planning. You might be intimidated with it because it entails a lot of hard work and financial insight but when done correctly, it can help you reach your financial goals a lot faster and help you enjoy the fruits of your labor.
People are often too immersed with their present need that they forget all about planning. Sometimes they are not really to be blamed because all they can think about is how to get their paychecks to cover their month to month need. It is either just enough or barely enough that they have to look for ways to earn a little extra on the side just to get all the essentials.
The budgeting behaviour is a complicated issue but the bottomline is to ensure that they have more than enough to cover their expenses. People need to have a roof over their heads, clothes on their back and food on the table. A lot are getting by because the financial lending system allows them to borrow for what they need now and pay it back in installment with interest just like the house, car and even with credit card purchases.
The sad part of this equation is that according to Gallup.com, only one in every three American consumers are able to put together a budget. This means that there are a lot of people who are just winging their finances and playing a guessing game with their income and expense. There can be months where they can cover their monthly need and there might be months where they do not have a clue where their money went.
Getting back to fInancial planning
Apart from making a household budget and being sure they stick to it, planning is also a crucial part of the whole equation. Here are a few things people could look into to help them be a better planner with with their money.
- Visualize the end goal. Just like in sports where athletes rally to great wins by visualizing it before it even happens, the same can be done with your finances. Although this should not underscore the fact that winning in anything in life requires a lot of hardwork, mentally visualizing the end goal helps condition the mind of consumers and helps make the task easier.
- Get people involved. One reason you might have been burned out already is that you have been doing it solo for the longest time. You have been carrying the weight all on your own and dealing with the stress might have already caught up with you. If you are married, you might want to share the burden with your husband or wife because the fruits of your financial planning will be for the both of you and the children. If you are still single, you can get help from friends or family members that you trust so you can set your finances straight with some planning.
- Set rewards along the way. One way to get excited again in planning for your finances is to set small rewards along the way. Apart from keeping discouragements at bay, this gets you looking forward to achieving small chunks of your plan. One example is when you reward yourself with a massage at the end of the month when you get to lower down your expenses by a few dollars. It might even be a good meal with your partner when you are able to manage and stick to your grocery and food budget for the month.
- Look at the progress. Huffingtonpost.com shares that one of the things financial advisers will do for their clients is to help them track their progress. This is an important because it can help you visualize what you have already done. If you are still far away from your goal, it is best to look at what you have already done. This can inspire you and reaffirm the fact that you are doing something right.
Where to focus on to reach your goal
Financial planning is putting together the blueprint you will follow to make sure you reach your financial goals. If you are planning on paying off your mortgage loans in under ten years then you crunch the numbers and find a way to make it happen. Here are a few things you need to focus on when trying to reach your goals.
- Increase income. Financial stress is one of the leading problems of adults in the country and this is mostly because of money management. One of the most effective ways to deal with this is to look for ways to increase your income. It can be getting a side job after work to augment your current income. It can also be trying to cash in on a long time hobby such as photography or even baking. These are things you already have experience in and actually enjoy doing.
- Curb expenses. This usually goes hand in hand with trying to increase income because it helps free up a lot more funds in the budget that can be allocated for financial planning goals. This can be as simple as closing the lights and shutting the water off while brushing your teeth. It can also be cutting subscriptions that you are no longer using. It can even be a good part of your financial plan as you lower food cost by planning your meals ahead of time and doing batch cooking.
- Strengthen reserve funds. Businessinsider.com shared how important it is to try and address your finanical obligations as you build up your reserve funds. You need to start putting money away for emergencies because when they come and you are caught off-guard, you most obvious choice is to borrow money just to make ends meet. This can leave you in a deeper hole that from when you started and push you further away from your financial goals.
- Monitor your budget. As you monitor your progress, you also need to monitor your budget because it is one of the most important things you have control over. You need to make sure that you are spending what you have wisely and not splurging on unnecessary purchases with the extra money you get from your side job.
Managing your finances is not a walk in the park but there are steps you can take to make the job a lot easier. Depending on what stage in life you are now, there are things you can do. If you are still in college, be mindful of how you use your credit card and how you take out student loans or if you are already married with kids, put together a budget and make sure you stick to it.
Financial planning will only be beneficial for consumers if they understand what needs to be done to reach their goals and if they stick to the actual plan. They might have laid out a great idea but if they fail to execute the steps in that plan then that is just a waste of time. With that in mind, balance becomes a crucial ingredient because putting in impossible goals could just lead to desperation and abandoning all financial targets all together. You need to work hard and work smart as well.