Why Have A Financial Plan?

When it comes to money, planning and preparation is always a good idea. While things might not always follow your plan, the plan itself will help keep your finances focused on your goals.

But why is it really that important? Your parents probably didn't have a financial plan. But we aren't living in the same world anymore. Credit is out of control. People live longer. Social security is always at risk in the future. Health care for the elderly isn't cheap by any means. Planning is important for many reasons.

A financial plan will help protect you and your family from many risks, such as not having a home, going bankrupt, losing everything you own in a lawsuit and other disasters. These events can be caused by a variety of happenings, such as injuries, illness, death and credit cards.

All those things might seem like a wonderful dream. But they aren't just a dream. They can be a reality through -- you guessed it -- financial planning.

By having a financial plan, you are protecting your family's finances. You have the proper life, homeowners, auto and disability insurance. You have a will. You have an emergency fund. You have little debt and a lot of credit. You have equity in your home.

Total consumer debt in the US is in the trillions, not counting home mortgages. Research shows that Americans have between 8 and 10 credit cards each. The average consumer has a credit card balance of $8,400 per card.

Debt makes it impossible to save for your future. If you want your to pay for your child's college, you have to get rid of your debt. If you want to retire comfortably, you have to get rid of your debt. Your financial plan should focus first on debt reduction, then on saving.

Why save? Because you will probably live until you are 90. Maybe even 100. People are living much longer. You will have to have a lot of savings to support yourself for 35 years after you retire. Most financial planners say that you should plan to live until you are 95, though that could be a low figure.

Financial planning gives you a better quality of life. You have less stress and enjoy your daily life more. You are able to pay for things without credit, such as your daughter's college education some day. You are able to drive a nice car without the large payment. You can buy a home for your family. You can retire when you want to.

You aren't hounded by creditors. You aren't trying to stretch pennies into dollars. You aren't awake at night wondering how you'll survive.

You have a plan that provides for you and your family. No, you can't prepare for everything. Despite the greatest plans, life has its own ideas. But a plan is beneficial to your present and your future. Take the time and form a financial plan. It will pay you back tenfold

Martin Lukac http://www.MartinLukac.com, represents http://www.RateEmpire.com, an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com

The Right Way To Set Financial Goals

Every financial advisor will tell you that to succeed, you must set goals.

But that just doesn't tell you enough. You see, there is an art to setting goals that actually work.

It isn't enough to just say, "I will get out of debt." While that is a good idea, it isn't a goal until you do a little work on it.

First, set yourself a time limit on your goal. If you have no date to work towards, then you will just be wasting your sweet time. You have to set a date to do this. For example, you can plan to pay off $10,000 debt in the next five years. You automatically know that you will at least have to find $2,000 a year to go towards that debt, not counting the interest.

This step is trickier than it sounds. You have to be reasonable when you set your goal. If not, you will just quit. That is why most budgets fail. They aren't reasonable. Set a date that will actually work for you.

If you miss your deadline, simply readjust your goal. You've made progress on it, so all is not lost. Just set another deadline and work towards it. Remember, life doesn't always work according to our plans. That is why plans and goals change over time.

You have to not only decide to get out of debt, but you must define what that really means. Do you really know what it will take to get out of debt? You need to sit down and write down your goal. Write down the time limit you have given to achieve your goal. Now define that goal.

I find that the definition comes in the actions that must be taken to achieve the goal. These small steps make a goal easier to handle. It is hard to get out of debt. But it is much easier to call your credit card and request a lower interest rate. A sample of your actions might look like this:

Put all credit cards in safe deposit box at bank. Call lenders and ask for lower interest rates. Shop around for lower interest rate credit card. Look at budget and find ways to increase money for debt repayment. Sell motorcycle and use money to pay off two credit cards. And so on. When you break up your goal into manageable steps, you will find that you roll right along to getting it accomplished. My husband and I wanted to get rid of our credit card debt for a year, until we figured out that we had to write down steps and do them one at a time. Otherwise, we just said it but never did it.

Now take a pad of sticky notes and write your goal on several of them. Put them on the front door. Put them in your wallet. Put them in your checkbook. Put them on your computer. Put them on your bathroom mirror. But more than that, each time you think about doing something that threatens your goal, you have to think about what achieving your goal will really mean. You might really want a new car, but when you think about it, retiring early means much more.

When you focus on the benefits of reaching your goal, the sacrifice doesn't seem to be so important. It is easy to live a frugal life now if you know it means a completely debt free life in ten years and early retirement in style. It is easy to not eat out once a week if you know it will help you get to eat a meal in Paris in a few years

Martin Lukac http://www.MartinLukac.com , represents http://www.RateEmpire.com , an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com

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