Reaching your financial goals is possible. Accurate records of incoming and outgoing expenses are only the beginning of economic freedom. Financial planning is the road map to success. Part of the working parts includes but is not limited to budgeting and saving as many people understand.
The United States Census Bureau estimates that those who have a high school diploma will earn about $1.2 million in their lifetime. A bachelor’s degree will net closer to $2.1 million. While these numbers are amazing, it’s shocking how many American fail to put a plan in place to make the most out of their income. Here are some more quick statistics to illustrate our point:
- Half of all Americans can’t cover an unexpected expense of $400
- The savings rate is just around 5%
- 26% of Americans have no savings at all
- 38 million households live paycheck to paycheck
- 36% of adults have no retirement plan
- 59% of Americans say running out of money is their number one fear
Financial planning has many benefits. We’ve compiled five reasons why you should consider it.
1. You Can Start Saving Money
The national average for having $1,000 in savings is around 57%. How much you should have tucked away depends on the financial security you’re wanting. The recommended amount is around 10% of your paycheck. Some financial planners suggest having a minimum of three months salary saved into an account. It boils down to your comfort level and the goals you have for your money. Having a financial plan in place can make these dollars work for you. Those who hired a financial planner reported at least $100,000 more in investments than those who decided to work alone.
2. You Work Past Just a Budget
Monthly budgeting opens you up to a whole host of opportunities. You can allocate finances to across different accounts for different types of savings and investments. Financial planning is an extension of budgeting and is a bit broader in spectrum. Think of a financial plan as a method for prioritizing your savings, getting out of debt, and paying off your house. It will include goals and information about what you will do when your income increases and decreases. A budget is the tool the works along the financial plan to get you more money into your pocket.
3. You Can Live Comfortably Rather Than Paycheck to Paycheck
Have a financial plan means you can focus on what you can have rather than what you can’t. We’ve said it a couple of times already, but being fiscally responsible is all about making your money work for you and not the other way around. Most people find finances restrictive. They consider it to be a boundary between what they need, what they want, and what they owe. It’s possible to feel a sense of contentment even in the face of debt. Statistics show that those who have a financial plan in place 48% believe they are living comfortably. That’s double the amount of those who don’t have a plan.
4. You’ll Get the Most Out of Retirement
Not everyone takes advantage of the investment opportunities presented to them by their company. A 401K is designed to help you save for retirement, but some corporations will have stock and investment benefits that will pay off in the long run. These benefits could range from 30 to 40 percent of cash compensation. That’s a pretty hefty sum. Knowing what’s available to you could help you take advantage of these benefits.
5. It’s a Contingency Plan for Unexpected Life Events
Financial planning is so much more than retirements, stocks, and savings. It’s part of a larger contingency plan for life’s unexpected events and includes insurance coverage. Many policies are available to make cash flow easier for friends and family in the event something were to happen to you. Working with a planner to create a portfolio should include things like health insurance, auto insurance, and life insurance. Fortunately, most states mandate the requirement for auto insurance and many people can find health insurance through their job. Life insurance might be the answer to having your family taken care of in the event of severe injury or death. You can allocate the finances to dependents under “the death benefit.” How it helps depends on you and your relationship. You can leave money to a spouse to help pay off remaining balances on a home or clear debt. It can also be issued to children and friends to help them prepare for their own financial futures.
Choosing the Right Life Insurance
There are a few life insurance policies available.
- Term Life Insurance – This policy is designed to protect you and your family, but will expire without value if the insured lives longer than the plan which can range from 5 – 20 years.
- Universal Life Insurance – Get the most flexibility with Universal Life insurance. You’ll have a low-cost benefit of term life insurance, but receive additional benefits such as saving.
- Whole Life Insurance – As the name states, this is comprehensive coverage. It will cover premiums, death benefits, and offers a cash value.
Life Insurance Nashville
Choosing the right policy can be challenging. Royce Williams Insurance is here for you. When you’re completing your financial planning, include insurance premiums as part of your goals for protection and as a cushion in the event something happens. We understand individual circumstances require different preferences to policies and we’re here to make that work for you. Visit our website to learn more and to get a free quote.