There is possibly no personal responsibility that causes such frustration in people’s lives as financial planning. While everybody desires to have a ready supply of cash reserves in order to have multiple choices in life, the process of getting to that point is fraught with much trouble and challenge. Financial planning is the process an individual chooses to order his or her finances in order to achieve specific goals and dreams. A central tenet of successful financial planning is organization. How can such organization enable a person to save money that can be used for long-term goals and dreams?
The most difficult issue involved in successful financial planning is balancing short-term needs against long-term goals. Current demands will always speak more loudly to the human mind than will long-term desires. Merely reacting to each need as it arises will lead to a quick depletion of any available monetary reserves and leave a person with nothing to show for income earned. Failure to properly organize monetary requirements will often lead to financial difficulty. Examples of such include failure to make complete payments or late payments that result in either higher accrued interest or penalties. Such mistakes will lead to more loss of money, and as a result there will be even less available to put aside for future desires. If a clear plan for putting aside money is not in place, then savings will not occur and long-term goals will not be reached.
An organized plan will allow monetary reserves to grow while preparation is being made to acquire a long-term desire. Whether cash is put into a bank account, a bond, stock or a mutual fund of any kind, this cash when properly invested will increase the amount of money available to an individual. An organized plan is necessary to know how much can be put aside, and the appropriate financial vehicle into which it should be placed.
A good rule of thumb is to consider the time horizon over which the desired goal needs to be reached. The longer that horizon, the more risk that a person can afford to take on. What matters is not what the amount of monetary reserves looks like at any time along the way, but that the amount of money saved is sufficient when the time arrives for the purchase to be made. Organization prevents the quick reaction that can lead to loss of money over the long-term of a savings interval.
Proper planning makes saving as automatic as possible. The easier that it is to put money aside for savings, the more likely that it will occur. The harder it is to access money that is to be put aside for savings, the less likely that it will be accessed for short-term necessities. A good organized plan will force money into savings vehicles that will be available when needed. Lifestyle choices are difficult to change and an organized plan is necessary to prevent impulse buying which is the chief enemy of successful savings. The emotion of wanting something will often lessen with time. The less that impulse buying is possible, the more organized a person’s spending is, the more likely that he or she will be able to put aside money that will grow over time and be available when needed to meet a long-term goal or dream.
The very act of creating an organized plan develops the discipline needed to save money over time. Money invested will continue to multiply upon itself. Many people are surprised how quickly just a small amount of money put aside on a continual basis can produce. Organization creates a complete overview of all an individual’s spending and income. It allows the person to see what is being spent, how it is being spent and why it is being spent. This overview can often identify areas where money is being wasted and enable simple steps to create opportunities for more money to be put aside. The process of putting money aside has the added benefit of being able to handle unexpected financial demands without having to access expensive forms of available cash. The more prepared a person is, the more likely that he or she will be able to use money in a wise way and avoid wasteful spending.
Organization also reveals potential problem areas that need to be addressed. If money cannot be saved, the person may realize that he or she cannot do financial planning alone. A financial planner is a professional who develops a detailed plan for how an individual or group should manage its money. While such professionals do cost money, such money is often a wise investment if it enables a person to save more money in the long-term. Wise financial decision making often involves investing a small amount of money up front in order to attain a large amount of money later. Delayed gratification does not come naturally, and the more detailed a money management plan that a person possesses, the more likely that he or she will follow this plan and be able to save money over time. That money will then be available to achieve specific goals and dreams.
Organization allows a person to act in a proper manner to achieve a goal. The goal of financial planning is to save money in order to achieve a particular long-term ambition. Money will accrue as an organized plan is followed and impulses are thwarted for the benefit of achieving a long-term goal or goals. Saving money is never a quick process. Patience is required to allow money to build up over time. Patience is encouraged through an organized financial plan either developed by the individual or by a professional. Having the financial resources to achieve a desired goal or dream is the reward for acting in a disciplined and determined manner over a long period of time.