Having a Financial Plan vs. Day to Day Approach

financial management tips

In a month, your income may or may not be fixed. But your basic expenses can be constant. To many people, a financial plan is necessary. It can serve as a guide on how an individual can spend and manage his resources. Not all people realise the advantage of having a working financial plan, though. There are those who prefer to spend without planning and handle their money on a daily approach.

Money management logically does not naturally or easily come to everyone. A financial plan will always be helpful whether you have tremendous or little experience with managing and handling wealth. Financial planning can generate numerous advantages that can cover different aspects of your life.

Having a financial plan

Your financial plan can be crafted by yourself or it can be created by a professional or a seasoned financial planner. It is always advantageous to carefully plan the way you spend and handle your income. Allocate amounts for basic necessities, discretionary spending, savings, and investments. This way, you will know exactly how much of your money goes to different aspects of your life.

Financial plans can help analyse current finances and point out strengths and weaknesses. It may help you realise that your financial or spending decisions are causing you to incur losses. If you have a huge amount of wealth, financial plans can very much help you in money management, which may include smart investments.

Contingency planning is also carried out through financial plans. If you acknowledge the fact that the future is uncertain, you will definitely have financial plans for yourself. It is an effective way to allocate and protect your finances very well. If you are planning to make large acquisitions or purchases, a financial plan can also guide you in allocating resources without compromises.

Day to day approach

Some skeptics argue that spending money without any planning is less stressful. This is because you can possibly live your life one day at a time. There will be no need to worry about the future. You can spend money regardless of amount today and never care about the future.

The day to day approach is a ticket to potential personal bankruptcy. That is because you may lose control on how you spend or allocate your resources. It is also quite common for impulsive spenders. Some people are just better off spending what they have in their pockets today and have the resolve to not spend anything tomorrow when the pockets become empty. They may tend to wait for the next inflow of income to enjoy spending once again.

The daily approach to spending is quite common in single individuals. They may not be thinking about their future yet. That is because they do not have families and children that will certainly require expenses. However, whether single or married, people are advised to drop the day to day approach to spending and adopt a financial plan. It is always best to have plans for the future.

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