Having clarity, along with purpose, when it comes to your personal finances is arguably one of the most important factors when it comes to reaching financial success.
But how exactly do you gain the clarity you need on what seems like an overwhelming, and complicated feat?
The answer itself is quite simple: By building a financial plan.
By building your financial plan you will start to develop a good understanding of your current financial needs, as well as understand how your future financial health will be impacted by some of the important financial decisions you make today.
It should go without saying that financial planning comes with more than just clarity. It comes with a lot of added benefits that will impact not only your financial health but your overall health and other areas of your life.
Here are 7 of the top benefits you’ll gain by taking the important steps and committing to financial planning:
1. Financial Planning Will Help You Focus On What Matters
A financial plan is a really great way to help you develop your financial goals, and focus on what matters.
By building your plan, you’ll start to get a sense of what your values really are, which will help you focus on key areas that are important to you and your future. This has a positive compound effect that will enable you to create better financial habits, particularly when it comes to your decisions.
To say the least, having financial goals is extremely important when it comes to being able to live a secure and enjoyable lifestyle.
In fact, goals can be the best way to give yourself direction, purpose, and to remain focused. This goes well beyond your finances as well.
When it comes to creating your financial goals, you’ll want to focus on the short term, medium-term, and long term goals. By doing this you’ll set yourself up for success now and well into your financial journey. Really what this does is help ensure that everything you’re doing works together to ensure you’re on track for financial success.
Sounds good so far, doesn’t it?
If you’re feeling a little unsure of how to get started with creating financial goals, here are a few pointers:
- Make financial goals that are personal: Don’t worry about what other people are doing, or even about setting goals just for the sake of setting them. You need to make sure that you are creating personalized goals so that they have much more significance and connection with the future you are focused on building.
- Make informed financial goals: When it comes to your personal goals, it’s extremely important that you take the necessary time to do your due diligence. Research them and make sure you know exactly what you need to do to achieve these goals. The last thing you want to do is set yourself up for failure.
- Set S.M.A.R.T. Goals: S.M.A.R.T. stands for Specific, Measurable, Achievable, Relevant (or Realistic), and Timely. Whenever you are creating new goals or reviewing existing ones, it’s always important to keep this framework in mind.
A financial plan helps you set goals, stay on top of your goals, and achieve your goals.
2. Financial Planning Can Be Motivating
Your financial plan helps you eliminate uncertainty around finances and guides you towards desired outcomes.
When you combine this level of certainty and clarity, along with having established clear goals in mind, it can end up being a very powerful source of motivation.
Your financial plan provides motivation because it:
- Provides a sense of direction for your finances
- Shows you the progress you are making and the steps you need to take
- Provides the reasoning behind your plan, which develops confidence
- Makes it really easy to set, visualize, and stay on top of financial goals
- Keeps you organized, and feeling better about your financial journey
Keep in mind that one of the best sources of motivation for anything in life is seeing results. You might not see the results you want to see right away, but by sticking to your plan you will start to see these results come forth.
3. Financial Planning Guides Your Actions And Decisions
Taking action on your financial decisions isn’t easy.
In fact, it can be extremely difficult and takes an incredible amount of discipline and commitment to move forward with.
Even if you have the most specific goals written down, without having a proper financial plan, knowing what steps to take in order to reach those goals can be overwhelming.
And again, this is exactly where your financial plan comes into play.
Think of your financial plan as a roadmap or even a blueprint.
It’s really there to help guide your decisions so that you can take action with confidence and comfort. Decisions that you won’t be worried about or second-guessing.
Having peace of mind when it comes to making important financial decisions is a very under-rated benefit that your financial plan provides.
4. Financial Planning Comes With Significant Emotional And Health Benefits
Health is wealth. And the opposite rings true as well.
This really means that having a financial plan to manage your personal finances is beneficial for your health.
A financial plan doesn’t just positively impact your financial well-being, it significantly impacts your emotional and physical health in a lot of ways.
For starters, people who have a plan in place for their money and understand how their money is being managed are known to be less stressed, less anxious, and more optimistic when it comes to their future.
The reason is quite simple.
Your financial plan directly correlates with how you feel about your personal finances and money management strategy. Having a solid plan in place then leads to more positive and optimistic feelings, which almost immediately lowers any stress or negative feelings you have about your money.
When individuals improve at least one area of their lives, such as their personal finances, it has a natural carry-over effect into virtually all other aspects of their lives.
5. Financial Planning Builds Confidence And Self-Esteem
Having a clear picture of your finances, and knowing that you are managing your money in efficient ways leads to positivity in many different ways.
When people are confident about their money and the decisions they are making with their money, it’s also very likely that they will start to become very confident with other decisions in their life.
This will have a direct impact on your overall confidence level and your self-esteem.
Feeling good about your finances has a direct correlation with your feeling of self-worth. So yes, in many ways your Net Worth does impact how you feel about yourself.
6. Financial Planning Can Be Contagious And Inspiring
Depending on how vocal or open you are about managing your personal finances, your friends and family will take notice.
Even if you’re not overly open about it, chances are that others will recognize your diligence when it comes to financial planning.
Not only that, they will start to see how your decision making with money is associated with your overall self-esteem and confidence. This level of confidence and self-esteem is contagious for a lot of people.
Putting it simply, people want to be around (and associated with) other people that put forth good energy into the world and show that they are both confident and happy.
Overall, this means that others will take more kindly to you. When you develop a good relationship with your money you are also able to develop a better relationship with yourself, which can positively impact your relationships with others.
7. Planning Improves Your Chance Of Success
Known fact: financial planning leads to an improvement in financial outcomes over time.
And it has to do with a combination of everything mentioned above, and more.
Individuals that are prepared with a solid plan in place for their finances are more likely to reach their desired retirement outlook and are more prepared for financial emergencies, compared to peers without any sort of plan in place.
Research conducted by Savology shows that households with written financial plans are more than 2.5X more likely to save for retirement. This is compared to households without having any sort of financial plan at all.
Your financial plan maps out the beginning, middle, and end of your financial journey or picture so that you can better prepare your finances and make financial decisions with confidence.
Getting Started With Your Financial Plan
By now you’ve probably realized that financial planning is no joke and that it comes with a lot of direct benefits that can go far beyond impacting your finances.
Next, you’re probably wondering what you can or should do in order to get started and build your financial plan. Well, you’re in luck.
Savology is a free planning platform helping people just like yourself reach financial success by providing financial planning for free. That’s right, it’s completely free, and it only takes 5 minutes to build your plan. You’ll also receive action items, to help with those important financial decisions, and a holistic report card, to give you a current snapshot of your financial well-being so that you have a clear indication on what areas you need to improve and how you can start improving today.