Do you know the most influential financial life categories to set your personal financial planning goals? In other word, the foundation stones of your personal financial planning life? In my experience, when planning to start personal financial plan, people found most worried about identification of goals. Such worries generally happening due to the ignorance of major factors that influencing most, to set financial goals. This article is the result of my effort to identify these categories to give you better awareness on where you required to put your time and work to identify and move with well set of financial goals.
Success of a personal financial plan entirely based on the goals setting by the person. What are those goals? How can I identify the goals? Work, work, work and work with right categories to identify the goals associated with its. But, how do you going to work without knowledge on what categories to work? So get ready to know the top five categories you should know to work on and identify your strengths and weakness to set right goals.Personal financial planning totally depends on five most important categories.Identification of your Assets, Liabilities, Personal Risk, planning on Kids future and education and finally plan for your Retirement. The time you set your primary goals, any or more of this category will get involved to the success of your goal.
Assets – Assets have major role in budgeting along with your liabilities. You must identify your assets at the beginning of your personal financial plan. A person generally have assets like properties, automobiles, collectibles, house, investments, furs and jeweleries, income from salary, any secondary income etc. Through recording and identifying your assets, you are not in a position to set any goals but, you have reached to the half of your major milestone by knowing your affordability to set any goals through following categories.
Liabilities – When dealing with liabilities category, lots of efforts required identify and record liabilities spanning to various sub categories.As it is the most important category to identify the personal net worth, missing any sub category may have considerable impact in the future.
As a rough, each person required to create a worksheet to identify the liabilities which originally falling to three major categories.- First, the ‘long term liabilities’ coming with auto, personal, eduction loans, loans against investments, life insurance fixed deposits, home mortgages, home equity loans.- Second will be recurring home expenses like home rent, utility expenses i.e. water, telephone, gas, internet, cable etc..- Finally personal expenses like toiletries, cosmetics, personal drugs, dry cleaning, clothing purchases, personal grooming, gifts, entertainments, vocations and travel, publications, club memberships, charitable expenses and other personal expenses etc.Make sure you have recorded each of the liabilities intact in a separate workbook to identify your liabilities for a week, month and year.The time when you finish the workbook by recording your assets and liabilities, you are reaching to the first mile stone of identifying your exact personal net worth or wealth by comparing both.Once after identifying your personal capacity to plan for future goals, you will come to know whether you are able to achieve any goals if set for the future or not. Knowing your capacity protect you from setting any goals that you are not able to achive. Not only that, identifying exact net worth help you to plan your budget in a structured way to save and add more money to the fund which work for your future goals.
Personal Risk – No one free from the risks happening from property or causalities. Major risks can be expected from house and household items like furniture, jeweleries etc.., health, personal injuries, automobiles etc. The elements in each of this can be fire, natural calamities, war, burglary, accidents, critical illness, hospitalization of self or dependents etc…
Working to identify your risks help you to think about possible protection method by knowing the best quote “Prevention is better than cure”. Naturally you will move to your first goal, safety from debt, incidents and any kind of possible loses.
Now, how do you feel about setting a goal to apply enough safety to yourself and family by possible insurance policies?- Think about possible term insurance to protect yourself and thus your family from any future possible financial burdens.- Think the method to protect yourself and family from health risks, risk to assets, automobiles, machinery and other valuables like jewelries, furniture, electronics items etc. – Finally, if you have a home mortgage, think how your family will pay this in case anything bad happening to your life, to decide the requirements of insurance against home loans.
Kids Education – Kids are our major wealth. Each parent in this world working for the betterment of their kids. Being a loving parent, you must have a plan to meet the expense of their education and marriage in the future.
Starting of investments to achieve such goals and at the earliest is the best option for this. With this category, can you now identify the goals for the betterment of your kids?
Retirement – This is the category really having various secondary goals than any of the above. Any goals you have identified influencing by any of the above category are generally focused goals. But, with retirement category, only one focused goal involved. Required money for each month or yearly to lead better retirement life.
This category also have several secondary goals like, yearly pilgrimage, holiday plan, build a house, build a farm land etc..The major difference with the focused goals and secondary goals is, focused goals cannot be dropped because your personal financial planning is totally based on focused goals. Secondary goals can be dropped at any time because it doesn’t have any base relationship with your financial planning and totally depends on person to person.Yes, personal financial plan totally intend to have a better life throughout your life, meet necessary goals like kids betterment in the future, be safe from debt and any incidents happening to self, family members or any of your assets and finally a well settled retirement life with a newly built home or yearly holiday package to foreign countries.Do you still looking for any further information to work for set your goals?