Why Financial Planning can Make a Difference

Financial planning can make an enormous difference to your life, whether you are wealthy or below the poverty line. It enables you to plan for a future which will hopefully be financially secure, even if you are struggling at the moment. There are a number of other reasons that financial planning can make a difference.

Feel more confident about your future

It is very easy to live for the moment, deciding to leave the future to look after itself. That is very easy when you are young, but if you do not try to get a grip of your financial situation, sooner or later, you will reach the point where you realise that you are going to struggle and it will be very hard to get yourself back on track. On the other hand, if you start looking after your finances from an early age and seek the necessary help from a qualified financial planner, you will be able to enjoy life without the spectre of financial burdens hanging over your head. A study by Ameriprise Financial of US adults from 40-75 in 2010 showed that those with a written financial plan felt more ‘”confident about their personal financial future” (69% vs. 38%) than those who do not have a plan for retirement.’ 

Make the most of your savings

Seeking advice from a qualified financial advisor about how to make the most of your savings is a great way to ensure that you have the necessary advice at your fingertips. Simply saving money isn’t enough if you simply rely on your local bank to inform you of the best interest rates; an advisor should be able to recommend other channels you can investigate so that you make the most of compound interest and look at other investment ideas. That way, you can be sure that your savings are earning as much as they can while you get on with your life.

Ensure that your family is financially secure

Families tend to be expensive. Even if you aren’t planning on children coming along, you could be surprised. A February 2011 Guardian report suggests that the cost of raising a child to 21 can be around £210,000 in the UK; even if they are financially responsible for themselves from 18, the cost may still not be much short of £170,000. For the average family, these costs could be prohibitive unless much thought goes into financial planning. If you don’t have children, there could still be other needs for the money; your elderly parents, for example.

Be financially prepared for emergencies

Emergencies happen, unfortunately, even if you try to avoid them. If you are planning for your financial future, you should have the funds to hand to cover the costs of any sudden emergencies. If you don’t, then you will be forced to either borrow from friends and relatives, or go into debt. When you are young and all your money seems to be going into investments, it can be frustrating when you don’t have any money to hand, but it will be worth it when you are financially secure and can stop worrying about what would happen if an emergency struck.

Ensure your retirement years are comfortable

According to an HSBC report entitled ‘The Future of Retirement: The power of planning’, “On average ‘planners’ have amassed nearly two-and-a-half times (245%) more in their retirement plans compared to ‘non-planners’, 245%  and over three times more (319%) in non-retirement assets.” Retirement tends to come around before you realise. Ensure that you are financially secure in your senior years so that when your health starts to decline, you have one less thing to worry about. It also means that you don’t need to rely on your family to be financially responsible for you.

Financial planning may not change your life, but it will make it far easier to bear. Whatever your age, start planning for your future now.