Personal Financial Planning is simply a necessary part of life.
Any plan that deals with your money (career planning, business planning, transportation planning, food planning, hobby planning, vacation planning, entertainment planning e.t.c.) and what that money represents constitutes financial planning.
So, before you embark on analyzing ways to spend even a cent, understanding the fundamental principles of financial planning is essential.
You could be in a tough financial situation right now. Chances are that you panicked when you found out you are in deep financial problems. You panicked even before you had a true picture of your financial situation. That’s OK! This is the right time now to analyze your financial situation and map out your way out of it. There are no problems without solutions. The fact that you don’t know what to do doesn’t mean there are no solutions for your situation. It’s only that your brain doesn’t have the information it requires to figure out a solution for you. Once you get it... a solution comes up.
You need to know where you stand financially. Know how much you own and how much you owe others. Get a true picture of your financial situation (before you panic or live in worry) so that you can make informed decisions thereafter.
Setting financial goals involves identifying your needs and wants. Start writing details of how you want the future to look like. It’s important to get your thoughts onto paper. Get a pen and paper, or open up a word document on your computer and start writing.
You are not 100% sure that everything will go according to plan. You will need to have a financial reserve or an emergency fund to handle emergencies. So, include this in your personal financial planning.
In addition to emergencies there are risks in life. One of the few things that are certain in life is that nothing is certain in life. You need to be insured for worst case scenarios. Insurance is an essential part of risk management and financial security. Every financial plan must have provisions for insurance.
How do you want to live in retirement? It’s important to handle the issue early in life. You will need to know how much you need to put aside for for retirement every month after analysing your current and future needs.
Also, how you will distribute your wealth when you are still alive and after your death is an issue that needs to be taken care of too.
To achieve your financial goals you need to begin saving money. You need to come up with a savings plan integrated with investing. Investing is simply a must to build wealth and counter inflation. You can invest in stocks, unit trusts, real estate, precious metals e.tc. Just make sure you know what you’re doing, and don’t rush into investment scams like pyramid Schemes.
Even though most of above activities you will do them on your own, it's however advisable to seek financial advice from a financial advisor or financial planner to assist you in areas that you need professional help.
There are also personal financial planning tools that you can download or use here on the site to help you in your personal financial planning. You can either use:
Finaly, writing a financial plan takes rationality and creativity. You have to be rational enough to assess your current financial situation, creative enough to see what is possible, and have the integrity to follow through with the plan.
Just because it’s on paper doesn’t mean it will happen. You have to decide to follow through and live up to your goals. This is the hardest part, and the one that trips most up.
NOTE: Financial planning is a dynamic process. It will require regular monitoring and evaluation to ensure you are heading towards achieving your desired goals.
So, what about starting your personal financial planning right away?
Click Here to Evaluate your Current Financial Position.
A Financial Action Plan Workbook for Managing your Personal Finances. It's a step by step action guide that will take through the activities required to work on your family or personal finances.
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