The Value of Financial Planning for Debt Management

The Value of Financial Planning

for Debt Management

O When most people think of the term ‘financial planning’, building wealth for the future is probably what most often comes to mind. Financial planning is a great tool for creating your future, but it can also be valuable if you’ve gotten yourself into some difficulty today.

O It’s no secret that many people struggle with debt, and some of the concepts and principles of financial planning can help you get out of trouble now, and stay out in the future. Financial planning helps with debt management in several different ways.

Organizes FinancesO One of the big issues as it relates to debt trouble is

organization. When bills and sources of credit and payment dates are disorganized, debt problems are often soon to follow. Luckily, financial planning is all about organization and keeping track.

O Notebooks, ledgers, computer programs and similar tools all help keep your finances organized for wealth building, and they can do the same for debt management. When all your sources of income and your debts are written out in front of you, it’s possible to de-clutter your mind of all that information and get busy making it right.

Gets You On a Budget

O Another big strength of financial planning is that it helps get you on a budget, which is obviously a major weakness for many people who are having debt issues. The reason debt becomes an issue in the first place is from spending more money than you have.

O By utilizing financial planning principles, you can learn to make a realistic budget and stick to it, month after month. You’ll also be able to see where all your money goes each month, so it isn’t so much of a mystery.

O When you first start to stick to a budget, you’ll probably have to cut out some expenditures you’ve grown fond of, but that’s all part of the process. The goal is to manage debt and stay in control of your money. Living within your means takes discipline, but the rewards are well worth the effort.

Valuable Lessons for the Future

Credit

O Anyone who has found themselves in financial difficulty knows that more often than not, credit is root of the problem. Credit cards and credit lines are some of the quickest ways to get into debt trouble and stay there for a long time. The interest payments alone over the course of several years are enough to make you shake your head in disbelief.

O By applying the principles of financial planning, you can help to rectify your credit issues or avoid them altogether. And if you are currently in credit trouble, learning to deal with credit responsibly will be wonderful lessons for the future. It’s one thing to dig your way out of debt trouble, but repeating the same behaviors in the future won’t help you at all.

O Financial planning concepts will teach you that just because you have “available credit” doesn’t mean you should be using it. It also teaches you the dangers of making minimum payments on your statements.

Saving

O Although it may be a bizarre concept to some, stashing money away when you can is a great financial planning lesson that you can use for the future.

O Aim for saving roughly 10 percent of your income. If that amount is too high because you’re currently paying down debts or adjusting your financial lifestyle, set aside whatever you can. It’s always easy to find some way of talking yourself out of saving money, but in almost every situation, you’ll be happy you did.

Emergency Fund

O Creating an emergency fund differs from general saving a little in that it’s there for a specific reason. Having an emergency fund made up of actual money will enable you to avoid using credit cards when one of life’s unexpected surprises comes along. This will help with your debt management plan by not allowing you to create any more of it.

O Many experts suggest having six month’s worth of emergency money set aside, but for most people, especially those paying off debt, that probably isn’t realistic. Start putting some away, and do the best you can until you free up more funds.

Using a Financial Planner

O Financial planners are great for helping you to get a handle on your financial life and have it all make sense. If your debt problems are such that you’re in bankruptcy range, you’ll want to see someone else, but for management purposes, a financial planner will show you how to organize and manage for the present and into the future.

 O If you aren’t sure, make an appointment with a

financial planner and explain your situation. You may be surprised at just how much he can help.