Explained: The importance of financial planning

With all the complexities and challenges of handling your finances, you might wonder if there’s a simpler, more efficient way to do so.

The answer: effective financial planning.

In this article, you’ll learn why financial planning is key to a more reliable and rewarding financial outcome.

But first, you’ll understand why a financial adviser is crucial to help you develop this plan.

Why seek financial advice?

With financial planning being pivotal to successfully managing your wealth, you must ensure you develop and refine the best plan for your circumstances.

This is where a financial adviser comes in.

Your chosen expert will ideally come with a great deal of experience in the world of finances, and will be keen to understand your current circumstances and any concerns or obstacles you might be facing when it comes to planning your future.

Your adviser will help you create a financial plan that’s tailored specifically to your unique financial circumstances, as well as the particular short and long-term goals you have.

So whether you’re looking to develop your investment portfolio, plan for your retirement, or gain financial security, an expert financial adviser can be crucial when financial planning.

Why is financial planning important?

Effective financial planning is vital to help you manage both your present and future finances. There are various reasons for this, some of which include:

• Achieving your financial goals

Financial planning can help you achieve all your short and long-term financial goals.

Your financial journey is much like anything else – the more well-devised and expert your plan is, the more success you’re likely to have in your efforts.

Every individual has different goals, which is again why a financial adviser can help you refine them to align with your current circumstances.

For example, you may be approaching your retirement, and are hoping to retire at a certain age with a particular amount in your pension pot – enough to sustain your dream retirement lifestyle.

These few simple goals alone come with many things to consider, so you need both an expert approach and advice to help you understand how manageable these goals are, as well as the specifics involved.

A financial plan ensures you have all the necessary steps laid out clearly and accurately, to show you what you need to do to achieve your unique financial goals, and how long this may realistically take.

• More effective investment strategies

Investing is a core component of many of our financial journeys, and this is why financial planning can help to identify more appropriate and potentially profitable strategies.

Change can happen in every area of the financial world, and your wealth’s resilience is likely influenced by a range of factors. These can be external such as inflation and how markets perform, and changes to your own circumstances such as a higher income or when you are approaching retirement.

Therefore, financial planning and investment management – preferably aided by a financial adviser – will ensure effective monitoring, evaluation, and adjustment of your investments, according to both your goals and the factors that influence their outcome.

Using the above example, for instance, you need to ensure you’ve contributed enough to secure your desired retirement goals. You may ask:

• Do you have enough invested to fund your lifestyle?
• Have you factored in tax allowances, structuring your contributions and withdrawals for tax optimisation?
• When will you be able to secure your return on investment?

With a clear financial plan, you can strategically execute your investments and contributions appropriately in line with your financial goals.

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As you can clearly see, financial planning is one of the most crucial components when it comes to achieving a favourable financial outcome. Moreso, if you want to develop the most accurately tailored and effective plan, you should seek financial advice.

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Please note, the value of your investments can go down as well as up.