The importance of saving money and planning financially for the future is well known. What might not be as well known or even realized is that in order to have a financial plan that is effective you must save money. Why do you need to save for the plan to be effective even if savings is part of the plan?
It’s not enough to simply include savings in the financial plan it actually has to be done. There are goals including in the plans you have made for your future and often there is a dollar amount that goes with goals. Buying a home, having children, retirement or just going out for an evening are all included in detailed plans for the future of your money.
Long term and short term goals in the financial plan are met with savings.
Whether you are planning to go on a vacation or for your retirement you must save money. The fixed income that most people find themselves on as they get older is seldom enough to meet their needs without doing without something. Even when they can get monetary or other assistance they can still find themselves turning to family and friends in an effort to make up the difference. This can lead to a feeling of helplessness that we all want to avoid.
Emergencies happen no matter how careful we are.
Saving money for an emergency such as an unexpected illness or decrease in earnings can keep the financial plan from being thrown off track. When we become unable to work we still have expenses that can pile up and fall behind easily no matter how short the time is that we find ourselves without an income. Simply planning for what we would do in an emergency isn’t enough we have to save to be prepared for them.
Budgeting is a part of financial planning that should include not only savings but ways to increase our savings whenever possible.
The budget is how we make sure that financial plans are being followed. There are somethings that we have to include in the budget and saving money should be among them. Whether it’s a little each week or a lump sum once a month it should never be left out. The savings should be earning interest; how much you want to save and how much you are willing to risk will determine where you put your money so that it earns for you.
Never risk more than you have to loose.
Investing is risky, and if you can’t afford to lose even a dollar you should probably avoid it. If you have a little bit that you can stand to loose then you should get with a financial advisor to find out what type of investments meet your needs.
Without savings the amount of financial planning done doesn’t matter because it won’t be effective. When you rely solely on your income to cover all of your needs and emergencies then you are in for a rather rude awakening when it comes time to cover those things that only planning for your future can cover.