Everyone has future goals, and achieving these objectives requires capital. In other words, you need funds to help you get to the future you want. Financial planning lets you clearly understand your financial position and set attainable goals.

This article will dive into the question, “What is a financial plan?” and provide useful tips on maximizing a financial plan. 

What is a Financial Plan?

A financial plan structures your finances to help you pursue your short-term and long-term goals. A financial plan is unique to each individual’s goals and life phase. Therefore, there is no one-size-fits-all financial plan.

Financial planning organizes objectives and helps people set a reasonable future based on their finances. You may have some wishes jotted down on a list. By planning your finances, you understand which are reasonable goals, which aren’t, and which ones to prioritize. A financial plan will help you save time and allocate the right funds efficiently. 

What’s in a Financial Plan?

Although each financial plan is unique to each person, there are some essentials to include:

Budget + Management 

The first step in financial planning is determining your financial standing. This should include your income, assets, debt (such as credit card loans and mortgages), and your expenses. 

Knowing this crucial information becomes the main foundation of your financial plan. By monitoring the money coming in and out, you can implement effective management skills by controlling spending and allocating resources to keep your financial health in check. It also gives you a clear idea of your budget and see where you can cut back and adjust according to your financial goals. 

Savings

Savings are essential to all of us because they help us keep funds for short-term and long-term plans and in case of emergencies. 

For instance, most of us would put money in savings to buy a house, others have savings for vacation, and everyone should set aside some funds for emergencies. Allocating finances to your savings helps set your priorities and have a safety net in case of unexpected events like losing a job or getting hit with medical bills. 

Insurance Planning

Insurance is a crucial part of our lives as it helps us protect our finances in many ways. Take medical insurance, for instance. Having full coverage prevents you from having to pay hefty medical bills that can drown your finances. Auto and homeowners insurance are also helpful in case of accidents that can cause expensive repairs and replacements. 

Allow some of your budget for insurance to help protect you and your family and possessions. Look at the different insurance coverages, see which ones you need, and compare prices.

Investment Planning

Creating an investment strategy and allocating some capital for investing can generate income and provide financial freedom and security for you and your family. 

There are many avenues for investing. You can invest by putting money in a 401k or other investment products. However, it’s vital to consider the risks of each investment option and only allocate funds you can afford. 

Retirement Planning

Retirement planning allows you to prepare funds for later in life, once you’ve retired. Consider other expenses, such as paying off tuition fees for your children or settling any debt you have, like paying off your mortgage. 

It’s important to determine what you need once you’re retired. Additionally, check out the different retirement plans, such as 401ks and IRAs. 

Estate Planning

Financial planning also means protecting your assets for your loved ones. Estate planning includes creating a will, trusts, and beneficiary designations to ensure your assets are distributed according to your wishes. 

Be detailed when creating the document. Outline how assets will be distributed upon passing and clarify who you wish to manage your affairs. It’s also crucial to note that there are laws and regulations around property and asset transfer. So, consult a qualified financial planner to help you guide you through estate planning and create a comprehensive financial plan. 

What Does a Financial Plan Look Like?

Everyone’s financial plan will look different, as it should. Your financial plan should be customized based on your financial situation and goals. A person planning to retire vs. a young professional will have a different financial plan. They’ll have different focus, priorities, and financial capabilities. What’s important is to have a goal-oriented financial plan based on your needs and financial standing and have a clear and in-depth strategy for working toward those objectives. 

Remember that a financial plan is an evolving document. This means the document adapts according to life changes and stages. The plan is flexible based on your current finances and life events. 

The Benefits of a Financial Plan

1. Provides Clarity & Direction

With a financial plan, you can create a comprehensive document that thoroughly examines your current financial situation. As a result, you’ll get a clear idea of where you stand financially, giving you an outlook on the direction you want to go and what steps you need to reach those goals.  

2. Helps Prioritize Goals

With a detailed overview of your finances, you can return to your list of goals and prioritize them accordingly. With a clear direction and planning your steps to get there, you effectively manage and allocate your resources to work toward your most important future objectives. 

3. Improves Financial Security

A financial plan can improve your financial stability. Planning helps alleviate financial stress by preparing you for short-term and long-term objectives and unexpected expenses. 

4. Helps Prepare For Retirement

Without a plan, you won’t know how much money you need to set aside for retirement. Structuring your budget provides you with a clear picture of how much you need to save and where to put your investments.

How Butson Financial Advisors Can Help

Developing a financial plan requires a thorough understanding of finances, including their nuances and complexities. Butson Financial Advisors understands how various life circumstances impact your financial situation. We strive to help our clients determine the best method for pursuing their goals, based on each individual’s financial circumstances.

With tailored financial planning, each client receives our team’s complete attention and the best plan based on their realistic, deadline-oriented financial future. In addition, we implement transparency and open communication, ensuring you receive all the necessary information. 

When you choose our financial planning services, you can be confident that Buston Financial Advisors will support and guide you in pursuing your financial objectives and beyond!

Contact our team today, and let’s start planning for your bright future!