The Importance of Financial Planning

No matter what walk of life you come from, one of the primary reasons to have a stable career is to be financially secure. Financial security is like an anchor that keeps your ship grounded, and allows you to feel safe both for yourself and your family.

Financial security is driven by one main component, smart investments.

When you invest smartly, you’re also investing in a way that leverages your income and helps you make the most of your savings. There are a number of pointers that determine how much and where you can invest.

The critical questions you need to be asking yourself are: How much do I earn? What is my future earning potential? How much time do I have before retirement? What are the investment options that are most lucrative in the current market? How much am I saving?

Once you’ve answered these questions, it will give you a fair idea of where your investment route is going to go. Ideally, the more savings you have, the more potential there is for you to invest in multiple plans or schemes.

Have a look at the below infographic to get a clearer picture of what goes into the different life stages of investment:

Life Stages of Investment

The Stages of Planning

As a Student

Your primary concern in this phase is to be able to go to a college of your choice and study your preferred academic course without any hassles. For this purpose, you need to assess how much money your preference requires and then apply for a 529 Savings plan accordingly. There are several options and avenues to choose from for a 529 plan, so it’s up to you to do proper research and pick the most cost-effective and lucrative one.

As a Professional

Picking your career path is a very crucial decision to make because this is what determines what your primary source of income will be. You have a higher potential at this stage to invest in plans because you don’t have any immediate dependents. This means you can afford to contribute a more significant portion of your income to savings. Starting to invest at this stage is ideal because you’re starting off early, which means your eventual rate of return will be much higher.


Getting married does increase your financial responsibility and dependency, and your expenses see an overall rise as well. However, it is a bonus when both partners contribute to savings. This way you can consider investing in joint plans that can benefit your future as a family. Usually, this is a good stage to start reviewing insurance policies for medical and life.

As a Family

When children come into the picture, your responsibilities increase three-fold. So, now that your expenses are on the higher side, your savings might diminish as well. Your purchase of fixed assets like a motor vehicle and a home are most likely to happen at this stage. Hence, insuring these assets is a necessity and a very smart financial move. Your assets can be transferred to other family members, and the insurance will give it a cover of safety.

When Kids Grow Up

Just as you had to utilize a 529 savings plan for your further studies, you need to keep aside savings to facilitate one for your kid(s) as well. Apart from this, there also has to be enough security to fall back on for you and your family.


Your expenses at this time have gone down again, but so has your earning potential. So, how well you have secured your retirement stage also depends majorly on how much you’ve invested in the earlier stages of your life. Pension plans, 401k, Roth IRAs are some of the essential financial tools for retirement that should be taken care of during the initial stages itself.

Your financial planning needs to follow through in such a way that you’re able to find your preferred lifestyle, provide a comfortable living standard for yourself and your dependents, and also keep aside funds that can be used to fuel your future financial security. Ensuring your most prized possessions and assets is essential and cannot be ignored. Similarly, making sure your health and safety are also taken care of is important.

Finally, keeping the uncertainty of life in mind, drafting an estate plan will make sure that your hard-earned assets go into the right hands and are not misappropriated in any way. You can also avoid paying exorbitant taxes and use that money for other purposes.

The simplest way to keep a check on your finances is to do an annual review each year and make a checklist for the upcoming year too. As long as you stick to your goals and make them happen, your financial security will never be an issue!

Author Bio: Adam is an editor at Financial Planning Platform where you can find the best financial advisors in Rancho Cucamonga. He writes about how you can practice effective financial spending habits for a more fulfilling and consistent lifestyle for you and your loved ones.

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