Investment planning: meaning and why you should do it

Failing to plan is planning to fail

Allen Lakein

What is the meaning of investment planning?

Investment planning

You have identified your financial goals, which can be short term, intermediate or long depending on what it is; say you want to buy a house in five years time. To do this you come up with a plan. That’s what an investment plan is. It is a core component of financial planning that involves matching your financial goals with your financial resources and begins with the identification of one’s goals and objectives.

What are the benefits of investment planning?

1. Increased cash flow

A good investment plan will bring into account good financial habits like saving, tax planning, budgetting, less spending. This coupled up with monitoring your expenses the investment plan will increase the amount of money you got going out because the money you shall have made through the saving, budgetting and stuff will be put into a good and proper use by the good investment plan. This will in turn increase the amount of money coming in in terms of income. The sum of cash revenues and expenditures over a period of time, which is cash flow will increase if you come up with a good investment plan.

2. Improved standard of living

Good investment planning will see you invest or put your money in things that will see you have more money coming in into your bank account over a period of time, if it’s not the money coming in then it will be the money saved through budgetting and frugal spending over a period of time time that will see you live a better life. More money means you can improve your living standards, maybe buy a better house, new clothes and shoes, eat better food. Just doing what you are doing now but doing them bigger and better.

3. Peace of mind

You will have things under your control after you develop a good investment plan. You will have more money coming in so you won’t have to run up and down looking for some to clear your bills, pay your debts, you will have security both financial and to your family through insurance so you won’t worry because you got it covered, no worry of overspending on anything whatsoever because you shall be having a good budget in place preventing this from happening, you shall have covered for any emergencies through emergency budgetting, you will have increased cash flow which will improve your standard of living and many other things. All this will give you a peace of mind. You will be living life with less things to worry about because you shall have covered them in your investment plan.

4. Income

Talking of income, a good investment plan will;

  1. Increase the income: One of the steps in creating a solid investment plan is saving then coming up with a good investment strategy meaning by investment planning you will be able to put your money in something that will bring you more money than the one you injected in it. So by having a good investment plan you will manage more income, you will have more money coming in.
  2. Ensure proper management of the income; A good plan dictates that you save more money through good financial habits like budgetting and less spending. This will help you manage the money you have already acquired by understanding how much money you need for what. You will know how much money you need to spend on each and every monthly expenditures you have and this will make sure no money goes to waste on unnecessary things.

5. Security

You will provide your family with financial security. You will cover for your kids education, your family’s health and property through insurances. You will have everything sorted out in time and this brings about a sense of security.

6. Financial understanding

Coming up with a solid investment plan will give you insight on your current financial situation by knowing how much money you got coming in and through what ways and in addition to that you will know how much is going out in terms of expenses. You will know what is bringing you money and what is taking it away. This is financial understanding and by gaining this you will be able to evaluate what is best for you, what you really want.

7. Growth of capital

Solid investment planning requires you to save more through budgetting, spending less than you are earning, cutting your daily or monthly expenses among other good financial habits. This will mean that you will be able to have more money that you can use as capital to maybe start a business, make an investment or acquire an asset . These are options that will not only see your income increase but also grow your savings.

8. Preparedness

Investment planning will enable you to prepare for emergencies before they happen. You will be expecting the unexpected because your investment plan should be having room for emergency budgetting . Like I mentioned earlier this will make you live life with no stress.

9. Good choices

Investment planning is the process of matching your financial goals with your financial resources. Meaning you are using what you already have to get what you want to get. Achieving your financial goals will require you to have more money and this will mean that you will have to put the money you already have into proper use. You can do this by either investing the money or buying an asset and a good investment plan will make sure you make a good investment or buy a good asset.

  • Investment: A good plan will help you choose the correct types of investment that will not only help you generate more income to help you achieve your financial goals but it will also make sure that the investment you have chosen fits your tastes and preferences, your goals and your wants. This is because a good plan will consider everything about yourself from your objectives, financial situation to your tolerance.
  • Assets: One benefit of investment planning is that of gaining financial understanding. Assets come with liabilities and by gaining financial understanding you will be able to choose an asset that will not only be appreciating in value but also come with less liabilities and this means that you will have more money from it.

10. Increased savings

When you create a solid investment plan you will realise increased income which is will boost the amount of savings you make. Besides that, it will give you a good understanding of your financial situation, it will give you an overview of your finances or say a good insight into your income and expenditures, how much you are spending on what and from this you can consider cutting your expenses even further which will only mean that you will have more money in your saving account.