You know what a financial plan is, perhaps you have an idea of how to draw up one, but do not understand why you need it? What are the advantages of a financial plan?
It will help you objectively assess your current financial situation
What assets do you have, how effectively do you manage them? What are your liabilities? How much? How much money is spent monthly on payments on them? Should you try to get rid of them faster? What is the structure of your income and expenses?
Shows your future objectively
The plan will help you understand which goals you will achieve and which ones will remain unfulfilled. How will income and expenses change over time and taking into account inflation? Will your income grow every year? How much money can you save monthly?
Will give clarity of thinking
You will understand what you have, how much you earn, how much you spend, and how much you can spend, and how much you can earn, as well as when and how much money you need. And all thanks to a visual schedule for achieving your goals.
Will help to determine the goals, concretize them
When creating a plan, you will calculate the cost of goals, taking into account inflation, the timing of their achievement and the frequency of deductions for each of them.
Will help to prioritize and separate the true goals from the imposed ones
As you make your plan, you will find that the amount of money you can spend on achieving your goals and the amount of time to implement the plan are limited. After that, you will decide what you need, and what is imposed by social stereotypes.
Will give motivation to change the situation, earn more, spend more rationally
It is useful to see how your account is growing every month. This motivates you to keep going with your plan.
Get rid of illusions
Do you dream that you will definitely save up for a house by the sea by retirement? Or do you think that when your salary is raised, life will improve? Do you think that now you cannot save a single ruble, that your children will grow up / pay off your mortgage, and you will start saving most of your salary and quickly save up for a comfortable old age? The financial plan will show how your thoughts coincide with reality.
Will help you assess your capabilities
With a plan, you will see if your goals are achievable, such as when you can buy an apartment or a car. If some goals are unattainable, the plan will help you assess what needs to be changed in order to achieve the goals in the optimal time frame. Perhaps creating a plan will reveal non-obvious resources that will accelerate the achievement of goals.
Will help you choose the most comfortable and profitable option
The plan will help you decide in which order to reach your goals, focus on one, or save for several at once. It is impossible to make the necessary calculations in your head, since you need to take into account a lot of parameters.
Help you find balance
Between current consumption and the achievement of long-term goals, and also not go to either of the extremes.
Will give confidence in the future
You will not have chaos in your head from spontaneous impulses and thoughts, which is more important: a new car, repair, vacation, mortgage or pension, and a lack of understanding where to get the funds for all this.
Will show you what risks await you and help you find ways to avoid them
For example, build up an airbag and / or postpone a costly optional purchase.
Will help to avoid mistakes and rash decisions
Based on the plan, you will calculate whether you can afford to spend money unplanned. You will see how your day-to-day financial decisions affect your life.
Will give you an understanding of what needs to be done to achieve your goals
What do you need to change in order to get what you want in the future, what aspects should you pay attention to? A financial plan will help answer these questions.
Shows how liabilities decrease month after month, capital increases, and you become closer to your goals
This will support in such moments when it seems that you are cutting yourself in some way from month to month, and the goals are still not achieved. The plan will also help to assess how your actual figures (income, expenses, savings, pace, etc.) correspond to the planned ones.
Promotes Thinking Flexibility
Contrary to popular belief, a plan is a system that can and should be updated regularly. Have a new target? Do not rush to refuse it or, on the contrary, immediately mindlessly agree. Find a way to fit it organically into your plan.
Will help you choose suitable ways to save and accumulate
For example, some people want to open an IIA in order to save up for an apartment in five years and for retirement in thirty. But money cannot be partially withdrawn from the IIA, in which case it will have to be closed, which will violate the pension strategy.