Top 4 Financial Planning Mistakes Everyone Makes!

If you aren’t already aware, financial planning is an essential part of your life. It needs to be done to help sure up your personal finances, and guarantee you of a healthy financial future. 

Financial Planning

On the face of it, financial planning seems like a relatively easy thing to do. However, you’ll be surprised at how many common mistakes are often made. Today, we’re going to look at some of the main financial mistakes every seems to make. Hopefully, by taking a look at them, you’ll know what to do to avoid making the same mistakes!

Check them out down below:

Not Setting Clear Goals

The whole nature of financial planning revolves around one goal; to keep your finances in good shape now and in the future. However, there are loads of mini goals you should have throughout the process, and you must set them. Not only that, but you need to properly set these goals by actually writing them down and documenting them somewhere. 

The easiest analogy I can think of is to imagine you’re building a chair. If you don’t have any instructions, or a plan, written down, you’ll find it hard to build that chair properly and quickly. But, with everything written down, you have a plan to follow and stick to, meaning you get the job done quicker and better. So, get a blank word document opened up and start listing your goals. Think about how much money you want to save after a year, set yourself targets for your maximum spending per month, etc. With these goals, you have something to follow and things to aim for. As a result, it’s easier to plan your finances and see better results. 

Forgetting To Write A Will

A will is one of those things nobody likes to think about, but it is a big part of your financial life. If you’re a regular reader of this blog, you’ll remember I said in a previous post about writing wills that only half of adults do so. This is a big mistake, as your will is incredibly important with regards to financial planning. 

You see, it determines what happens to your estate and all your money when you pass away. You might think this doesn’t matter as you’re no longer alive so who cares where your money goes, right? Wrong, you should care. A big part of planning your finances revolves around what you do with it when you’re gone. You want your life's savings and all your hard work to actually amount to something and be useful rather than just given away. Plus, as mentioned on the Bannister Preston website, you want to provide your family with financial security for their future too. It’s a very important step, and you should get on the phone to your solicitor and write a will today. Even if you’re in impeccable health, you need to write a will. 

Failure To Keep Track Of Your Spending

One of the cornerstones of a good financial plan is ensuring you know how much you’re spending. Ideally, you should look at your expenditure every week/month and know exactly how much you spent and what you spent it on. Unfortunately, many people fail to do this. I think it’s a mental thing, we don’t like to see how much money we spend, and we think if we ignore it then we don’t have to feel bad about what we buy! Obviously, the problem with this is that we spend without thinking or tracking our purchases which can lead to overspending. 

So, what you need to do is keep tabs on everything you buy. An easy way to do this is to have a little notebook and jot down each purchase you make throughout the day. This is the best way of ensuring you know how you're spending your money, and how much money you’re spending. At the end of every week, you can look at your notebook and figure out maybe where you’re spending too much and where you can cut back a bit. In the long run, simply tracking your spending will help you save a lot of money. You should also always check your bank statements too. Have a look at every monthly statement and compare it to your notebook to see if there are any strange comings and goings. Again, this all helps with tracking expenditure and saving cash. 

Not Using Your Money Effectively

Perhaps the biggest financial planning mistake is that people don’t use their money effectively. They think that saving it and putting it in a savings account is a job well done. While saving is essential, sticking your savings in an account really isn’t that effective. You don’t gain much from having your money in a savings account, the value will only gradually increase over time. 

Instead, you need to use your money effectively and invest some of your savings. Don’t lump it all in an account with poor interest rates, invest it in something that grows in value over time. You’re looking at low-risk investments here, ones that won’t fluctuate dramatically every day or two. Stocks can be a good investment, as can real estate. But, there are even things called ISA’s that are investment savings accounts. To you, it’s the same as putting your money in a regular savings account as you don’t do anything personally. But, behind the scenes, someone from your bank is investing your money in various things to help it grow over time. So, you get the benefits of saving money, with the added bonus of gaining more money as time moves on. 

These four financial planning mistakes are made by pretty much everyone. Now, you can go away and ensure you don’t make them yourself. You know what to do to avoid them, and it will keep your finances in the best shape possible. As a general rule, mistakes cost money. So, the fewer mistakes you make, the less money you will lose.

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