Financial planning: Saving is key to stable income for life

Smart financial planning revolves around saving money from your income. Fundamental financial wisdom for centuries has been to spend less than what you earn. But many people around the world either do not save at all, or even spend more than what they earn. So they borrow money on interest and accumulate debt. The result is that instead of earning interest on investments, they end up paying interest on borrowings. That creates the opposite of wealth creation, which is wealth erosion.

Save a Percentage of Your Income

You always have two choices in life. The first and the most tempting choice is that you spend all that you earn and live for today. But tomorrow when you retire, or go through a rough financial patch even before you retire, you will not have a financial cushion to soften the blow. That leads to the typical roller coaster lifestyle where you keep alternating between good times and bad times financially.

The second choice is to maintain a more balanced, even, and consistent financial status throughout your life. Proverbially speaking, instead of killing the goose that lays golden eggs and enjoying a short-term feast, you enjoy one golden egg a day till the last day of your life. This can be achieved by having a committed savings plan as a part of your financial planning. As a cardinal rule, you must spend less than you earn and save a percentage of your income.

Invest Your Savings Wisely

The second part of your financial planning is that once a considerable amount of savings have accumulated, you invest them wisely. Money itself is a money-earning instrument. Create a well-balanced investment portfolio that includes a fair proportion of very secure and moderately risky investments. Begin your investments with an emphasis on financial security, and graduate towards moderately risky investments only once your financial security net is sufficiently strong.

One of the first priorities of a smart saver should be to invest money in buying a home. Cut down your expenses wherever possible, and be frugal with your cash. Wealth creators in history do not like to spend, they like to invest. So choose investing over consuming. This will create an ample financial cushion for a lifetime of stable income and stable spending. It will see you through times of financial crisis without letting your lifestyle suffer in any significant way.

Conservative Financial Planning

True financial planners are always conservative in their approach towards spending money. Growth cannot be achieved without investment. Even a highly skilled and high-earning individual will have to retire one day. Therefore, retirement planning is a must for everyone. Insufficient retirement planning is just like insufficient insurance coverage that will prove inadequate when the need arises.

One of the truest causes of the prolonged financial crisis in the United States and Europe has been their habit of over-spending. Individuals, corporations and governments spend more than they earn, and start borrowing on interest. The result is a vicious debt cycle that creates deep economic stagnation and financial struggle. Debts cannot be wished away. They must be paid off. Saving and investing are healthy habits. Borrowing and spending more than one’s income are fundamentally flawed habits that constitute the root cause of all financial trouble in the world.

How to Avoid Financial Disaster

One of the most traumatic stresses has something to do with financial instability. Tough times may not last but one has to face the grim reality of recession, unemployment, rising commodity prices, debt crisis, and so on.

It is important to avail of financial services for proper guidance. Here are tips that serve as checks for financial wellness.

Seek Advice of a Financial Planner

Financial services can help provide direction to achieve goals related to current situation. In particular, a financial planner can assist by providing a sensible advice and make the most to achieve goals, whether it’s about saving for a house, having a family, financial investment, tax considerations, investment, insurance, or retirement plans.

Understand the Financial Terms of the Market

It’s hard to know what’s going on, if one doesn’t speak the jargon or the language of the financial market. Learning financial terms helps make informed decisions about financial trends.

Learn Basics of the Share Market

Along with understanding the ‘language’ of the financial market, one has to know the market world. The share market and the economy moves in cycles. Understanding these cycles and what causes them greatly helps in making the most and best investment opportunities. It also eases a lot of stress in downturn times.

Develop a Financial Strategy

A financial plan helps keep people on top of things. Having a plan in place provides something to work towards. It puts a structure in place and makes plans and progress measurable. Depending on one’s financial situation, a financial planner can help develop a strategy to achieve goals.

Take Retirement Pension Seriously

More often, retirement pension is taken for granted or ignored. This pension is one of the most valuable assets. It is the future source of income upon retirement. The plan should be appropriate to one’s circumstances.

Know Financial Investment Options

A financial adviser can be consulted for further assistance. There are many different types of investments. Higher risk investments have higher returns over a long term. Investment options should be understood in order to be comfortable with decisions to choose from. Investments can be in the form of property, bonds or stocks. Investing is about making the most of one’s money. It’s true, life is not all about money, however, it’s a traumatic pressure without it during tough financial times.

Protect Self and Family

Financial insurance options have to be considered. Depending on circumstances, it’s important to know what are available, the coverage and the most cost-effective way to access a cover. No one likes to consider the worse case scenario of death, but it’s worth having a plan in place, in case of any eventualities and there’s a family and other loved ones who are left behind.

Circumstances continuously change, and so will needs and life objectives. To make the most of continuing environmental and situational changes, one needs to be financially prepared.