The way of spending money has changed in a manner that one can pull out a plastic card and swipe it in credit. When money is available in credit easily, people have developed a mindset to spend without planning. One should do concrete financial planning in order to fulfil their future needs and also to raise their standard of living. The short-term goal and long-term goal of an individual is determined by the financial planning that is done today.
The following are a few of the reasons which can trigger individuals to manage their finances in an organized way.
#1. FINANCIAL INDEPENDENCE
To be rich is a desire to many but the term richness varies from an individual to an individual. Financial independence is not as same as richness, but it encourages one to not depend on a single paycheque to experiment their wildest dreams. These dreams can be achieved through effective financial management. When one plans their finances accordingly, they can save a huge amount and get a job that gives joy. Also, one can concentrate on his/her passion towards exploring.
#2. BUYING HOME
Buying a home is a dream for most people. In probability, this dream is being achieved with the help of bank loans. Bank lends you only 95% or less than that of a property price. The remaining money called as down payment should be paid instantly to process the loan. In addition to this, some amount is needed (5%) for the registration. In such a case, one should have managed his finances throughout his/her life, and also saved efficiently to do the down payments and the registration.
Though our hope is against emergency situations, it is unavoidable and can happen at times. One of our family members can end up in serious health issues, the bike might get a tedious repair or even we could go for an unplanned trip. These emergencies can happen at any time and one cannot rely on a bank or a friend to lend money. In that point of time, the way he/she managed their finances and the savings they hold till date, gives them a hand in emergency situations.
It is a hectic task to live as a businessman. Whether the money comes or goes, it is always in huge amounts. On a good day, business’ profit reaches the peak, but on the contrary, the business’ loss can even wipe out huge bank balances and also can get to a point where the business has to completely shut down. This is where financial management comes into a play. As a businessman, one should save or invest (in assets) some percentage of the profit amount rather than investing everything in the business again. Only these savings can help during the business’ loss.
#5. FAMILY SECURITY
One can earn in Lakhs, and even more. But the person can come across an unfortunate situation any time which can even cost his/her life. During such times only the financial management through insurance or policy can ensure the survival of his/her family. This insurance policy provides a lump sum of money which could be used by one’s family, either for children’s education or medical expenses or to buy assets for the future, as a long-term investment.
#6. EARLY RETIREMENT
For the people aged 45 plus early retirement is kind of a daydream and a distant goal. It is recommended to get suggestions regarding how to manage the finances and ways to save for retirement from people who have prior experience with handling early retirements. One can take such measures to manage their finances properly and could even end up sipping a tender coconut in Andaman island, and travel around the globe on getting early retirement, at ease.
#7. HEALTH HAZARDS
Absence of financial management not only affects the future but also have a direct impact on present health conditions. The CIGNA 360 well-being survey in 2018 submitted a report stating that nine out of ten Indians (89% of the Indian Population) were affected in stress, and finance was the major reason for it. As per the European Society of Cardiology experts, financial stress increases the heart attack risk by 13%. These stats signal one to manage their finance in an organized way to stay out from getting financial stress.
In reality, parents and mentors insist on an individual to learn financial management as soon as they land on a job. But high school is the right time for an individual to learn and follow it. Because teenagers now, do part-time work and freelancing depending upon their financial need. Those who follow the financial management at an early age tend to have a clear knowledge of how to save money. They have the ability to avoid getting debts when they work as full-timers and even when they start-up a business.