BBN Special

Why you need a financial plan for your income

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Yusuf Boluwatife

Having a financial plan, in simple words, means setting boundaries for your income. This entails how and what to spend on, ventures to invest in, percentage to save, and so on.

Below are few reasons why you need to have a financial plan:

• Preparation for inflation

Inflation is the persistent rise in the price of goods and services, and this has been a major affecting Nigeria’s economy. A financial plan helps in managing income in situations when prices of commodities soar. It will help you to quickly adapt to the new prices, and re-adjust your level of spending without much discomfort.

• Helps in having a realizable budget

A budget is the sum of expected expenses (money spent) and revenue (money earned) over a period of time alongside means to achieve them. Hence, a financial plan will help you engage mainly in transactions that will result in cost minimization and and profit maximization. This means that you would only spend on profitable things and cut expenses reasonably.

• Helps to develop wise saving, investment habit

Financial planning will help to analyse the estimated risk and rewards attached to a particular investment. In case of savings, it helps you to set aside reasonable percentage of your earnings periodically. With a financial plan, you also identify reasonable risks.

• Increment in assets

Having a good financial plan will help increase your assets. Though the return on investment aren’t the same for all assets, a well-thought financial plan will offer you several investment options as well as risk assessment and strategy. However, you may require the help of a financial advisor.

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