Building a personal financial plan required lots of effort. Most of the time, people even don’t know where to start and what will be the important points to keep in mind when planning their finance. In this context, knowing the core have importance to not miss any major points when one moving with her financial planning. Here is the core for personal financial planning for your knowledge and update.
1. Pay Your Bills: Never hesitate or default to pay all your bills. It make you free from debt and losing money as penalty for making any late payments. Have a better practice of paying bills immediately after getting the same to your hand.
2. Be Debt Free: Debt always drag a person from building wealth. Remember, debt always increasing in a compounding manner and any of your investments or savings will be useless later, once if you have huge, increasing debts. The better advice here is, start saving or investing immediately after paying of all your debts and being a debt free person. If your investments and savings grow with a 10% annual rate but your debt increasing in a 14% annually, there is no point of saving any money at the end other than paying your debt later.
3. Build An Emergency Fund – I have posted various article in the past, emergency fund is a must requirement to any person who required to plan finance properly. An equal amount of your 6 months salary can be kept in a separate account will meet this requirement. This money will protect you from the occurrences of any emergencies, that can happen from any angle, simple or severe, in the future. Practice to not touch on this fund as it is only for your emergency requirements. Also, remember to build the amount to the previous level once after the fund used as full or partial, in the future.
4. Protect Yourself, Your Family and Major Assets: Have necessary protection through insurance from self, family and assets. Applying term policies, with an insurance equal to 6 to 8 times of your annual salary. This will ensure your family will be safe from financial burden in case you are not with them in the future, by happening anything bad to your life. Protect your family through enough medical insurance cover to escape from huge monetary requirements happening due to falling sick or accidents. Protect all your major assets using enough insurance. Home and valuables inside it, Vehicles, ornaments all should come under this insurance umbrella to avoid huge money loses in the future. Here is the guidelines to select worthy insurance.
5. Save and Invest For Future: Remember the golden rule of early saving. Early saving has major role in long term wealth creation. Money required time to grow but gradually. Have a practice of saving money from the day one of your job or business. Practice required money saving tips and methods to have secondary income than main. Power of compounding will come close to you as your best friend if start saving early. One should plan to save and invest majorly for for kids future and retirement. Anything others will come next than said as a secondary goal from these two main goals. Here is an interesting article says ‘Making more money does not guarantee financial stability’
Above 5 are the core of personal financial planning. Even though, a person still required to have some soft skills to be succeeded. Common sense plays important roles all over the financial world. Skills to analyze things are most important. Also, it is must to provide good knowledge to your kids about money and teach them to build a right habit of saving than spending. Never loose temper at any stage of your financial planning life but, required to face any issues with patience and prudence.
Your valuable response or comments on this article shall be highly appreciated.