Using financial planning to manage debt and boost savings

Using financial planning to manage debt and boost savings

With the pace of life today, merely planning ahead a couple of days can feel like a painstaking process. You may even ask yourself: Does financial planning really make a difference? 

When it comes to saving money, people's behavior tends to go either way: They are either planners or nonplanners. Nonplanners generally save when they have some extra money, which may mean putting a little extra into their work retirement plan and hoping for the best over a long period of time. Planners typically have a good idea about what they are saving for, how much they need to save and how long it takes to achieve.

Sound more like you? If so, you are not alone, either. Only 36% of Americans have a written financial plan, according to Schwab's 2024 Modern Wealth Survey.1 In that survey, the rest indicated that 43% didn't have enough money to have a plan worth it, while others noted it was too complicated or they didn't have the time to figure a plan. The positive thing is that most people that did not have a plan were able to at least recognize that they could do more to better manage their finances.  

Here are five ways financial planning can help you save for your future!

1. Financial planning boosts confidence

Of individuals with a written financial plan, 96% say they are confident they will reach their financial goals. In fact, 76% report they feel more in control of their finances through the financial planning process. Financial planning allows you to create a measurable goal to work towards. Because you can track your progress, you can alleviate doubt or uncertainty about your decisions and adjust to address challenges that could derail you.

2. Financial planning can move you toward saving

The most cited reason for not having a financial plan is "I don't have enough money." This is incorrect. Financial planning, even in small incremental steps, does not require large amounts of money to begin.
In fact, financial planning can function as a vehicle for behavioral change to inform lower-income households to develop better saving and budgeting behaviors. A written plan organizes priorities and as mentioned earlier, provides a measure of success.

3. Financial planning can aid you in designing an investment portfolio

Your financial plan can provide a comprehensive overview: You’ll know what your goals are, what your timeline is in reaching those goals, and how comfortable you are with risk. With a big-picture view, figuring out how to reach each individual goal becomes clearer.

This is going to include the idea of saving—effective savings is money that you are going to need in the near-term or as an emergency fund—and the notion of investing, which is setting aside money you will need in the long-term and hopefully grow exponentially. We found in our survey 3 in 5 Americans are investors, and with a financial plan as a guide, you will be able to make more intentional decisions around investing, versus doing it with no direction and hoping for the best to happen.

4. Financial planning can support better money behavior

Financial planning has to do with investing, yes. However, it can also support what money can do for your confidence, security, and quality of life—like insurance protecting you and and emergency fund bringing you peace of mind. In fact, a financial plan can be the table setter to support people with good money habits.

5. Financial planning can be determined based on the planning personality types. 

Your orientations to life can shape your every decision, even the ones that have an impact on your finances. Understanding your planning personality type can help you take appropriate steps forward in achieving your financial goals.

There are six types of financial planning personalities:

• The Organizer loves to plan and make lists. They get a warm, fuzzy feeling by categorizing and organizing everything, from their sock drawer to their finances.  
• The Architect is an innovator based in both creativity and logic. They don't just envision the future, they design a solution that can guarantee it.  
• The Philosopher is derived from the Greek meaning "lover of wisdom." They love thinking about a problem and solving it.  
• The Dreamer is a free spirit and is likely shaking their head in confusion at the bunches of planners who schedule every detail of their life. 
• The Improviser is usually quite independent and self-sufficient, and also has a strong desire to do things their own way. 
• The Maverick does not apologize for who they are and what it takes to get what they want. They would rather remodel their world than live in it.

How can you tailor your planning to your personality? 

For those who are organizers, architects, and thinkers, premeditated actions to try to find a solutionis part of your nature. Planning financially can provide a safety net for your well-being while allowing for improvement and growth.

Similarly, for those who are dreamers, improvisers, and mavericks, seeking spontaneity, even a little plan can go a long way to reaching the freedom you seek to live, while also achieving the future you picture. A written plan can provide you with a little framework to keep you living life financially, without too much pressure, allowing you space for any improvised commitments or to spend your income as you pursue a carefree life.

Bottom line 

Financial planning can sound tedious; however, it provides the framework for understanding, monitoring, and achieving goals. If you're saving for a singular event like a house or for retirement or if you require . a full comprehensive plan and wealth management, a financial advisor can help assist with identifying your priorities and helping to achieve a plan.