Banka: Importance of a financial plan

A financial plan put down in writing will help you achieve personal goals in life.

Most people have a common goal which is to make as much money as possible while they can so that they can retire and have enough money to sustain them until they die. But how are you going to accomplish that?

Many people are stuck in the ‘I hope I have enough put away for retirement’ or ‘I wish I had enough money for that dream vacation.’ There is a way to make it all come true.

I would suggest that the way to get there and the way to make wishes become realities is to create a financial plan. This plan will tell you where you need to get to, how you are going to get there and, because it is written down, you can refer back to it and you can organize your life to achieve your goals.

Your financial plan can be set up on a five-year basis with a review every year to tweak the five-year plan or amend it to add the next year.

The plan will help you to save for your children’s education, retirement, take inventory of the various household expenses that you need to pay during the year and it may even indicate where you can cut back.

All financial plans need to start with savings and becoming wise on how you use credit.

Within your plan, I would strongly suggest that you work with a financial planner at an investment firm. They have the software that can run many ‘what if’ scenarios when it comes to how to invest your savings.

If you have been working with a financial planner, you will realize that all the media hype about a recession is just that—hype. Recessions are common and we have an average of four recessions in a 20-year period.

The other thing that is common is downturns of the market. For every gain there is always a loss, the trick is to be diversified enough so that your gains exceed your losses.

When you have a financial plan, you can make some informed decisions that will move you towards your goals rather than just hoping they will come about.

If your plan is written, you can periodically check to see if the decisions you have made have brought you success or failure.

Also when times are tough, you can refer to your plan and decide whether to just ride it out, or make some changes.

However, a plan is not going to serve you if you never refer to it or follow it. That might happen if the plan is not realistic, accurate or just plain too hard to follow.

Perhaps you’ve planned to save $500 a month and find that was not realistic. Well, don’t abandon the plan, change it. It is better to at least save as much as you can when starting out and then eventually cut back on other items as time goes on.