Building good financial habits and practicing them often is how people achieve financial freedom. Financial planning is the practice of putting together a plan for your future, specifically around how you will manage your finances and prepare for all the potential costs and future for when issues may arise. This process of taking a comprehensive look at your financial situation and building a specific financial plan to reach your goals. Financial planning includes multiple areas of finance: investing, taxes, savings, retirement, your estate, insurance, and more. Using a budget will change your financial perspective.
According to research from Charles Schwab, only 33% of Americans have a written financial plan, making personal finance, the least adopted habit — by far — that is important to your long-term well-being and living your best life.
Having a financial plan has numerous concrete benefits:
Confidence: A written plan increases your confidence and reduces your stress. When you have a plan for how to use your money, you know what you need to do to live your best life.
Better habits: When you have a written financial plan, you develop better habits. People with a plan are much more likely to:
- Save more
- Invest appropriately
- Have an emergency fund
- Reduce banking and investment fees
- Avoid credit card balances and have a good credit score
- Pay bills on time
- Re-balance portfolios and regularly update the financial plan
The result of those financial habits? Better outcomes. If you have a financial plan, you are more likely to be able to achieve your retirement goals. You also will be prepared and less stressed during an emergency.
Written financial plans may be especially important for low- and moderate-income levels. Approximately one-third of low or moderate income households with a written financial plan save 10% more of their income, compared to only 1 in 10 households without a written plan.
One of the most common ways people pay themselves first is through a 401(K). Retirement funds you allocate to long-term savings can be invested through a myriad of professional money managers. Consistently over the long term, professional money managers have provided the best returns for retirement accounts. When preparing for retirement, consider talking to a financial professional to inquire about their services and get yourself on track to a well-funded retirement so you can live your best life into your next season.
Core Bank is proud to offer this free Financial Literacy Program where you’ll learn ways to best handle everyday financial events. You can also take control of your finances with our new Personal Finance Management Tool! Personal Finance is a free digital money management tool, integrated into online banking and our mobile app, helping you stay on top of your finances by aggregating all of your accounts in one place. With customized budgeting features, smart expense tracking, and mobile access, you can manage your finances easily and securely from anywhere.