Why do we need financial planning and benefits?

When we talk about financial planing, most people suppose it is far away from our daily life and it is the business in investment banks by some (claimed) financial experts. In fact, almost everyone did financial planing by himself or herself. When we were in childhood, we planed to buy some toys or candies. Sometimes, we found we did not have enough money to buy, we had to wait for a few days to get more money. This is an example of financial planing, so simple!

In brief, financial planning is to prepare money for future expenditures beforehand. The earlier, the better!

 

Financial planing applies to everyone, especially, it suits to poor people. The reason is like this

  • 20% population controls 80% global wealth.
  • 80% population has to fight against the left 20% wealth.

It means that, on the average, ordinary people do not have much money. They need to make a feasible budget when they spend every single penny.

We need to save, we must face with truth that we will retire when we are in 60s. This means that we will live a life with pension.

The quality of retirement life is based on savings.

From the above figure, we can see the savings and retirement are not in the same direction. One wants a decent retirement life, he should have enough savings.

Planing retirement in advance is only aspect of our life. We will encounter all kinds of situations in our entire life, we need to prepare before hand.

We might have some unexpected accidents, such as,

  • Traffic accident, which might cause one family bankrupt
  • Fire disaster in home, which might ruin everything in one family

Problems caused by natural aging law

  • Kid’s eduction fee, in some countries, it is a heavy burden.
  • Medical fee for all of family members.
  • In some countries, some old persons do not have pensions from the government. This cost is needed to take into account.
  • Our own pension problems because of inflation or some elderly chronic diseases.

Some emergency problems

  • There is no income because of layoff
  • How to payback house loan because of no income
  • In this case, will apply more loans?

We need to seriously take all cases into accounts beforehand. If we can not resolve these problems wisely, it is likely we will fall into debt traps. On the other hand, we will have a decent retirement life if we resolve these problems.

The benefits for good financial planing

  • peaceful mind, we can face with the future problems without worrying
  • The probability of heavy debt will be lowered to minimum.
  • Your assets will increment and you will become more confident.
  • Achieving financial freedom becomes possible. You can make full use of your time to do what you want.

picture source: https://www.flickr.com/photos/68751915@N05/6870886851/in/photostream/

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