The Truth About Financial Planning: What Beginners Must Know
Personal finance blogs often highlight financial planning as a way to gain control over your cash flow. Financial planning can be surprisingly tricky—people believe many myths and misconceptions about it. When you want to secure your future, you might believe anything that sounds sensible, especially when managing your money. Here are financial planning myths that you need to stop believing today.
Myth: No Need for a Financial Plan If You Budget
Fact: While spending and savings are included in a budget, you still need to make a financial plan. Though budgets and financial plans have some overlap, they are not the same thing. A budget tracks spending and saving habits, which helps you become familiar with your cash flow. Meanwhile, a financial plan includes things like housing costs, insurance, retirement, and more.
Myth: My Advisor Will Take Care Of Financial Planning
Fact: Even if you have a financial advisor or planning platform, you need to make sure you’re working. It’s up to you to improve your financial literacy and discover new ways to get closer to your goals. Your financial advisor can only suggest ways forward—the final say belongs to you. Conversely, you shouldn’t think that you can DIY every aspect of your strategy. You still need to consult an expert, especially for the more technical aspects of financial planning.
Myth: Financial Planning Is Expensive
Fact: Financial planning isn’t only for the wealthy. If you are an income earner or have financial responsibilities, you need planning. Investing and planning are no longer for six-figure earners. Innovations in technology and the financial industry have opened these up to everyday folk. Today, there are apps and platforms to help you create and manage financial plans.
Myth: Financial Planning Is a Waste of Time
Fact: Creating a financial plan takes time, but the hours you spend will be productive. It also won’t take as long as you think; you won’t have to spend as many days or weeks to work on it. Financial advisors also have platforms that help them deliver accurate and personal plans that take approximately five minutes to publish.
If you’re thinking of investing but have no money, you might think that planning isn’t worth it. However, this is the best place to start planning! When you’re on the ground floor, you have more wiggle room—you can set milestones and create action plans exactly how you want.
Myth: You Only Need to Plan Once
Fact: Financial planning requires a commitment to success. If you want to reach your goals and improve your lifestyle, you need constant upkeep and maintenance of your plans. Once you create your plan, you need to keep taking action. You also need to review your plans and update your profile every three to six months. Many things can happen in a matter of weeks, and frequent check-ins ensure that you are still on track.
Myth: Financial Planning Won’t Work
Fact: Financial planning is a proven and tested way of helping people reach their goals. When you have a financial plan, you are approximately 2.5 times more likely to save a suitable amount of money for retirement.
People with financial plans also make better decisions about spending and saving, set and reach financial goals, and are more productive at work. It makes sense—it’s easy to feel better about where you are in your career if you feel like you have a purpose. A financial plan gives you direction and reminds you that you’re working towards something significant.
You need a financial plan to succeed with your goals. A plan helps you navigate your day-to-day and makes money management less daunting. It also gives you a course of action, which is helpful when you get distracted from your main goal.
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