Why the financial plan matters in times of uncertainty

Personal finance

Why the financial plan matters in times of uncertainty


  • Covid-19 has clouded livelihoods, businesses and economies.
  • Amid this uncertainty, financial priorities have shifted.
  • The pandemic has poignantly taught us that in planning for the future we must always anticipate the unknown.

Covid-19 has clouded livelihoods, businesses and economies. Amid this uncertainty, financial priorities have shifted. The pandemic has poignantly taught us that in planning for the future we must always anticipate the unknown. It’s time to get back to basics.

Some financial experts believe that the best time to reset financial goals is during an economic downturn like the one we are experiencing. This is because when people realign their expectations with reality, they tend to focus more on what matters to them.

Indeed, the challenges of Covid-19 have forced many people to avoid unnecessary spending as they consider ways to protect and increase their income and wealth. It may seem counterintuitive to even think about planning for an uncertain future, but as they say, not planning is planning to fail.

In economic theory, human needs far exceed the resources to meet them, the so-called scarcity problem, emphasizing the value of clearly defining and sticking to spending priorities.

A personal financial plan is essentially a step-by-step process detailing how one intends to achieve important goals in life by effectively managing this scarce resource called money.

Creating a plan is not enough, you have to follow it.

Behavior scientists tell us that people make better financial decisions when they have control over their spending habits, such as avoiding impulsive decisions that can derail their financial goals.

Personal financial planning has many benefits, firstly by empowering individuals to set and achieve goals, thereby creating a sense of purpose. A good plan incorporates the use of financial tools like insurance to mitigate risk and assets like stocks, bonds, cash and land to generate income and wealth.

Second, planning helps people align their financial goals with their values. For example, taking out life insurance means a strong desire to protect one’s family financially in the event of death, disability or illness.

Parents who care about their children’s future will always be thinking about how to get there. Thinking about setting up a fund to cover their education is imperative in this context and a good education policy is one of the savings vehicles available for this purpose. Why? It allows for very disciplined savings over a long period of time and, if well organized, should mature to coincide with the date funds are required. In addition to protecting the potential downside risks that could hamper the achievement of this goal.

Third, financial plans improve the ability of individuals and families to cope with life’s vagaries and risks.

Health insurance should be included as it alleviates the financial burden of disease management and especially given the increasing prevalence of lifestyle-related diseases. Of course, pandemics like Covid-19 also remind us of the fragility of life and health as well as the fact that no one can predict with certainty what the future holds.

Fourth, financial planning has been shown to have emotional as well as mental health benefits. A 2017 survey by the Lincoln Financial Group showed that 83% of Americans with a written financial plan feel better after a year. With the majority stressed by the pandemic, financial planning has never been more important.

Fifth, increasing income and wealth through assets such as stocks and bonds requires a plan, which takes a long-term view while optimally allocating liquidity to available investment opportunities. .

From the above, it is clear that failure to plan is a recipe for disaster. Unfortunately, many people make financial plans based on little information and research. There is also a tendency to trust friends and family to make important decisions.

While there is nothing wrong with seeking advice from people we trust, it is worth doing your research and seeking professional advice. Having a trusted, credible, innovative and knowledgeable financial partner helps you make the right decisions. For example, hiring a professional asset manager or investment advisor will save you from having to track investments and instead focus on achieving your long term goals. A good insurance advisor will help you identify the right products for your family and business based on your needs and goals.

In an increasingly digital world, such a partner must demonstrate demonstrable agility to meet rapidly evolving consumer needs through an innovative and diverse product offering, all geared to meet agreed customer needs.

We also need to dispel certain attitudes, myths and beliefs that limit the ability to plan financially. There is a common belief that buying life insurance is like contemplating death, a taboo in some communities. Or the attitude that medicare is not necessary until you are sick.

Think of insurance as a financial protection tool, not an expense. A good driver will never embark on a journey without a spare tire, not because he punctures but just in case he needs it. This gives them the peace of mind to make the trip.

The post-pandemic era opens up new opportunities for personal financial growth, but requires a new mindset. That said, a personal financial plan is more than just a set of commitments on paper.

Rather, it is a compass with which to navigate current and future economic uncertainties, on the path to financial security.