5 Major Components Every Financial Plan Needs to Have
Financial planning can be seen by some as a task that is quite difficult to accomplish. For others, creating a financial plan is an event that takes a huge amount of time that does not receive great results. However, a financial plan can be quite beneficial to individuals and businesses. In fact, there are five components that a financial plan needs to have.
The first component that a financial plan needs is a roadmap for the future. People can easily wander through life not knowing what they will be doing. They may spend time working an odd job for a while and may go back to college to receive more education. While there is nothing wrong with that, it is good to think about the future. If there is an idea to go back to school or get a new job in the next five years, it needs to be addressed when creating a financial plan.
Another component that is needed is to set a certain amount or percentage of money to save. Saving can seem like a difficult or trying task that needs to be accomplished. While saving does take determination and perseverance, the reality is that saving money or putting it into a specific account can be a wonderful benefit when it is time to switch jobs or an emergency comes up.
A financial plan needs to be created with reality in mind. When making a financial plan, people can easily make a plan based on what could happen in the future. They may assume that they will receive a job promotion in a year or two. There might be an assumption that a move to another state will be quite soon. While thinking ahead is certainly a good idea, be sure that financial planning is based on what resources are available today and not what resources could be available tomorrow .
When creating a plan, it can definitely help to ask a financial advisor for assistance. Although the plan may be done, receive assistance an individual who is experienced in financial planning. He or she is experienced in knowing what needs to be in a plan. A professional can give advice as to what is lacking in a plan or what needs to be cut. Furthermore, a planner can provide advice and answers that can make financial planning effective in the future .
The final component that a financial plan needs to include is addressing retirement. Although an individual may still be in college or a few years away from retirement, it must be addressed. It is good to consider where retirement savings will be placed. A 401K or investing in the stock market can be solid ideas that will prepare people for the future.
Although a financial plan does take time, energy and detail, the effort can certainly be worth the investment. These five components can certainly assist people as they think about making a financial plan. Starting the process is a great way to begin.