What Is Financial Planning?
Financial planning refers to a wide range of activities that help you take control of your financial life, such as figuring your net worth, outlining a budget for your spending and savings goals, and exploring different financial products that can help you meet those goals. Although some people use a professional financial planner to help them, easy-use-programs like Quicken are a more cost effective alternative and enable you to manage your own finances.
Financial Planning Is for Everyone
A financial plan benefits people of all income and wealth levels, not just the super wealthy -- a financial plan is more than just a means of investing surplus cash. It can help you manage your debt, such as student loans or credit cards; budget each paycheck for necessities and luxuries; and save for future goals, such as college tuition for your kids or retirement.
How to Start Your Financial Plan
You can start making your financial plan at any time, and it starts with an honest look at where you stand. You have to check all your accounts to see what you have and how much you owe, and then you can use this knowledge to develop a plan for how you're going to manage your assets or tackle your debts. Putting this information into a financial planning program like Quicken can help you wrap your mind around all the various numbers and accounts.
Benefits of Planning
Having a financial plan helps you build wealth because it helps you figure out the best strategy for investing your money. A plan can also make you feel more confident about your financial situation. According to a Certified Financial Planner Board of Standards study, 50 percent of people who have a personal financial plan and make between $50,000 and $99,999 say they live comfortably, while only 46 percent of people who make more than $100,000 but don't have a plan say the same thing.
Planning Is an Ongoing Endeavor
Making a financial plan isn't a one-time event that you sit back and admire for the next few years. Instead, your financial plan allows you to regularly measure your progress toward achieving your financial goals. For example, if you set a goal for a dollar amount you want to save for a future expense, such as a housing down payment, you can measure your current savings against what you budget to determine whether you need to save more or you're ahead of the game.