What is financial planning? Learn all about it!

Posted on ago. 08 2022 By: Oneblinc 5 min. read

Financial life can be tricky if you don’t have organization and control over finances. If you have it under control, it is more likely that your goals will be achieved in the next months or years. This is why it is important to know the answer to “what is financial planning?”.

Despite being the most essential item to financial education, it is considered difficult for lots of people. With it, it is possible to manage your budget, making it last and be used for what really matters. Understand “what is financial planning?” and how to use it in your life. 

What is financial planning?

If you don’t know how to manage your personal budget, it is likely that you use all your money without achieving any goals over the month. In order to have better usage of your monthly income, it is essential to create a financial plan, organized in a document, describing your current budget and your goals. 

That is the definition of financial planning: the practice to organize your next steps and usage of your money. When you plan for the future, it is possible to evaluate how much you may spend if something unexpected happens and to define a path to achieve your objectives.

Financial planning is not just used to become wealthy in the long-term, but to make good use of the money and not spend more than you can. This is why the document must describe all your expenses according to each month and the amount left, which is what you can use freely (spend, save, or invest). 

If you want to create personal financial planning, the main information you must know is: your assets (car, emergency reserves, and investments), debts (all kinds of loans and credit cards bills), and spendings (how much you use for necessities, what is the month you have more expenses, and an average of how much you spend in a month).

Usually, a financial plan covers all your expenses, but other specific types allows you to organize in objective areas:

  • investment planning;
  • retirement planning;
  • tax planning;
  • real estate planning.

Why is it important? 

The importance of financial planning is to be prepared for unforeseen events and be able to deal with it without difficulties. Besides, with an organized plan, you will have good use of your money and achieve your goals, having an opportunity to change your life. 

A woman with a pencil on her right hand close to financial planning papers.

How to do financial planning

Now that you don’t need to worry about “what is financial planning?” anymore, create yours and achieve all your goals. To start your document, you need to set financial goals: what do you truly desire for the next months and years? 

By defining objectives, you keep focusing on saving money and not spending too much. A few examples can be: buying a house, changing your vehicle, renovating your home, retiring early, and traveling around the world.

The second thing you must do is track your cash flow by thinking about where it goes, how you spend your money, and how much you receive every month. All of these may guide you to redirect your money toward short, medium, and long-term goals. Respectively, it can be: start an emergency fund, reduce credit card debt, and retire. 

Another aspect you can’t leave behind on financial planning is the emergency fund. Besides predicting what can happen and how much it can cost, you need to have the money in case it comes true. The same must be considered for interest rates: they can get higher. More than knowing the number of interest rates, you may be ready to pay them on time

Last but not least, it is important to add investments to financial planning. More than just counting on emergency and retirement funds, you can also invest in the market and have a good return. 

A few financial planning tips

Now that we explain “what is financial planning?”, we are going to give you a few tips to simplify it. Check it below! 

  1. 50/30/20 rule

There is a rule called 50/30/20 to simplify money management. According to it, your money will be divided into: 50% for your needs (utilities, health care, transportation, groceries), 30% for your wants (entertainment, going out, buying new clothes), and 20% for savings (put into an account or invest).

  1. Define life-changing goals

Define long-term goals that will help you to create a better environment for your family, to ease your debts, and to improve your life’s quality. Life is not just about paying off your debts and spending your money on obligations but to achieve balance, financial independence, and more goals on your bucket list. 

  1. Use your goals to keep focus

If your goals matter, they will be enough to focus on managing your money. This is why you must define objectives important to you, like your dream car, or the trip you’ve always wanted to go. 

Get financial help with OneBlinc!

Now, you know the answer to “what is financial planning?” and are ready to reorganize your finances. Yet, in case you need help to ease your medium-term goals, such as paying off your debts, count on OneBlinc’s solutions. We are here to help you easily!

About us

Unexpected things happen more often than we would like them to. That’s why OneBlinc is here to help, whether you have an emergency or just need that extra cash to go through the end of the month. We believe in people, and we understand that everyone might need money someday, somehow.