Financial planning is imperative to make sure your finances are in order while you are alive, and also to convey your wishes for assets after your death. However, a 2022 study showed that only 29% of surveyed Americans have a written financial plan. With the uncertainties in life, if you don’t have a plan, now is the time to get started.
The best way to create a comprehensive financial plan is to meet with a qualified financial planner, estate planner, or attorney. They can help you look at the entire scope of your finances, your goals, and what you need to get there. It is also helpful to have a professional check for mistakes, do risk analysis, and give you confidence in your financial future.
Whether you work with a professional, or decide to try it on your own, financial planning has several advantages.
Set Financial Goals
Goals are essential in all aspects of life, and can help us succeed, but they are especially helpful with our finances. You need to determine how much you need in savings, be ready for retirement, and decide if you want to plan other expenses, like buying a new home or a car. To reach these goals, you need to have a detailed summary of your income, expenses, account balances, investments, and other financials. Once you have this information, you can set up a budget that will allow you to meet your goals. You can evaluate if you need to adjust spending, make more money, and if you have money left over.
Consider The Future
Looking at your day-to-day finances and short-term goals is important, but so is planning for your financial future. In a study done between 2021 and May 2022 the majority of non-retirement-age adults surveyed have some retirement savings, however 60% of them don’t feel they are on track for their retirement. There are many ways to save for retirement, including 401(k)s through your employer and Independent Retirement Accounts (IRAs). Planning these investments now can help you retire when you are ready, and with enough money to live comfortably.
Planning for the future also includes planning a last will and testament or living will. This can be a complex task, and it is usually best to work with a qualified estate planner. A major advantage of financial planning is ensuring your money and assets are distributed according to your wishes upon your death.
Prepare For Emergencies
You never know when you will face a major financial hardship, like losing your job or a major medical expense. Most financial planners will say that individuals should have enough money in savings to cover 6-months of living expenses. There are also lower-cost emergency expenses, like a car or appliance repair. In a recent survey, 60% of Americans surveyed couldn’t pay cash for an unexpected $1,000 expense. If you have a solid financial plan, you can work towards saving for unexpected costs.
Decrease Stress
According to the American Psychological Association (APA) finances are the #1 stressor of Americans. In a survey they conducted, 77% of participants they surveyed stated feeling anxiety about their finances. Creating a financial plan can help relieve some of the stress finances can bring.
This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.
Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.
