06 Feb Top 5 Reasons Why You Need to Have A Financial Plan
Financial planning is a necessity for everyone. It is essentially keeping aside an amount of money for a specific goal or purpose. The most basic form of financial planning is to save up your money in a piggy bank. What we would usually do is to open a bank savings account. Other ways of financial planning are to invest in a retirement or education fund, purchase insurance (life, medical, property, automobile, business), investing in real estate, stocks, unit trust or gold, start a business and also to buy a house or car. The goal of financial planning is to ensure that not only do you save up enough money to achieve your goal but also it is to make certain that you have enough money left for your everyday needs such as settling bills and purchasing groceries. We have compiled the top 5 reasons why you need to have a financial plan.
You will have a deeper understanding of your financial life
Track your income
To be able to understand your financial situation, you will have to start tracking your income and expenditure either manually (by recording it down in your notebook) or by downloading a money tracking apps on your phone. By doing so, you will able to track what the bulk of your money is spent on, whether it is spending on necessities or leisure.
Know your priority
Once you have a clearer picture of your financial activities you have to start making out a list of things to prioritize. Ensure that your utility bills (electricity, water, rent), groceries and other financial commitments (insurance, credit card, income tax) have been settled. Next, you should decide how much of your income to save up on a monthly basis. In general, it is better to save up as much of your income as possible. When it comes to shopping and making purchases for leisure purposes, try your best to purchase within your means and only if it is really necessary.
You will know how to put your money to good use
Banking accounts, cards and e-wallets
Equipped with a better understanding of your financial life, you will now have to learn how to properly utilize your money. For recurring bills or payments, you can choose to set up automatic payments in your selected bank. You may want to transfer a fixed amount of funds to a banking account which has a debit card that you use to buy your essentials. E-wallets and prepaid cards are also a great way to segregate your cash to curb the possibility of overspending. For those who use credit cards, it is important that you are aware of your credit limit and the amount of interest your bank charges for repayment. A credit card is a great product to have when it is necessary for you to make big purchases or during emergencies. However, you must always be aware of your credit card’s policy to avoid falling into debt.
Insurance, Retirement and Education fund
Financial products such as insurance require you to pay a recurring premium usually on a monthly or yearly basis. Most people will shy away from purchasing insurance as they do not see nor understand the need to be covered or protected. As there is no certainty in relying on luck and good fortune alone, a good insurance plan will definitely be put into good use when the need arises. Be it health, life or travel insurance, you and your loved ones will be protected in the event of sickness, accidents, and death. Retirement and education funds follow a similar system as insurance, you will have to make a monthly contribution to be entitled to a large amount of money that you will only receive a specified amount of time which could be many years depending on the policy of your product. Rest assured, when the time comes you are bound to be able to reap the rewards.
You will have sufficient funds for investment
When you have mastered the art of managing your money, it may be time to start thinking about investments. Now that you have saved up some money the next step you may want to consider is how to use your savings to generate profit.
One such investment that is relatively low risk is a fixed deposit. Just make sure you have researched which bank provides the best interest rate on return and also the length of the tenure.
Stocks, unit trust, gold
Other forms of investments that you can look into are stocks, unit trust, and gold. These are investments that yield high returns but at high risk. For those who are interested do ensure that you only invest the extra money that you have saved up and understand the inner-workings of such investments.
Purchasing real estate is also a great way to make your money grow. Be it a house or apartment that you can rent out of turn into an air BnB or a commercial shophouse that you can rent to businesses.
You will be able to enjoy a higher quality of life
Strategic financial planning is the key to financial freedom. Once you have learned how to manage and grow your money you will be able to enjoy a higher quality of life. However, do always be mindful of your spending habits as money management is a life-long thing.
You will be able to give back to society
With financial freedom comes the ability to give back to society in ways you see fit. You will be able to donate to charities that you feel strongly about and also make a positive impact in the community. You can also open up the business that you have always been dreaming about. Financial planning is something all of us should start today and not tomorrow. It is never too early to start learning how to manage our money properly. We should have the opportunity to attain financial freedom and live a comfortable life. Just in case you find yourself short on cash, do not hesitate to approach a legal money lender in Singapore. There are many trusted firms in this country that provide flexible interest rates and arrangements especially for those who are interested to apply for personal loans. All in all, make sure that you only deal with a licensed company that is certified to provide the best personal loans in Singapore .