Benefits of financial planning are many. Most adults do not have any educational background with finances. Because of this, they find the task daunting and overwhelming. Unfortunately, they do not realize that you do not have to be an expert to plan for your financial future. Benefits of early financial planning include more time for compounding, a decreased cost of things, and added protection against rainy days.
More Time for Compounding
According to Fortune Builders, compounding interest is interest that compounds on itself. Consider it as interest earned on additional interest. Given time, this compounding interest can cause a snowball effect on the road to wealth. Investing even a small sum now can add up to a large sum later, even if you never invest anything more than what you started with. Starting early with your financial planning will help you invest a small amount that you can afford and reap the rewards years down the road. By consistently saving and investing, you can build a comfortable retirement plan.
Things Are Cheaper
When you are young, financial choices are often cheaper and more cost-efficient. For example, without kids, you can live in a smaller, cheaper space and save money for a down payment on a house later. You can also invest in life and medical insurance premiums. According to Insurance Center Associates, term life insurance premiums are cheap when you’re young and healthy. This will save you money in the long run and protect your loved ones from potential harm. Living within the budget you establish will help you control the outflow of your money and significantly decrease your expenses.
Life insurance is thought to be expensive and not easy to qualify for. These are myths, life insurance is cheaper than many realize and can be purchased without a physical exam. It pays to shop around and find the best policy that fits your individual needs. Money.com has put together a list of their 12 Best Life Insurance Companies to help you navigate in your search for life insurance. At TCG Insurance Solutions we recommend Ethos life insurance. You can run quotes using our exclusive link: https://agents.ethoslife.com/invite/08f8
Unfortunately, life happens to everyone. According to Solera Asset Managers, most Americans have a savings of less than $1,000. Setting aside a rainy-day fund is crucial to help prepare you for unexpected medical expenses, in case you lose your job, or costly home or auto repairs must be made. Because you made a financial plan, a stressful situation will be weathered much easier and you will not be in danger of financial ruin. Preparing for the unexpected will help mitigate the unfortunate events that will inevitably occur.
Debt-to-income (DTI) ratio compares how much you earn to your total monthly debt payments. Understanding your DTI is crucial if you are thinking about buying a home or refinancing a mortgage. Crunch the numbers with Money’s DTI ratio calculator and find out where you are in your financial planning journey.
Financial planning is known to affect your financial, emotional, and physical wellbeing. Living within your means with a plan establishes a sense of security and pride in what you do. The satisfaction that comes from meeting your goals is incredibly rewarding. Start your financial planning early to have more time to compound interest, capitalize on cheaper opportunities, and add protection against rainy days.
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