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NO doubt, there are lots of people still confused on the term ‘personal financial planning’. Growing searches in Google on this subject shows the increasing interests from the public for having a perfect financial plan to secure future life. Getting basic knowledge should be the foundation stone to have a future perfect financial plan. This article would help you various factors that would consider when thinking about personal financial planning for life.
I am totally against to search for a third party like personal financial planners or advisers at the very beginning of personal financial planning process. It is also not advisable to depend on any freely available financial planning software’s that claims as the best tool to do the same. To have a successful financial plan, an individual should determine right, achievable goals and understand present status along with gaining required knowledge to prepare a well defined financial plan. He also should have necessary understandings on how to move to achieve the result.
One should lay the financial planning foundation by knowing present status and goals. Age, goals, financial status, inflation all are some of the factors, should consider when setting goals. To give a helping hand to identify and draw a preliminary financial plan, here are some must look areas to assess self and identify where you are now and where you want to be:
Earning and Spending Report
Well known as ‘Budgeting’, it should be the first step to the financial planning world. Those who plan finance for future should start from budgeting by having good understanding on what it exactly means, why it is required, what would be the end result and various components involved in it. Budgeting help us to evaluate present financial position to proceed with next financial planning steps.
Requirements of Being Debt Free
Success of financial planning always depends on some important factors that have been successfully taken care at the beginning of the planning. Having a perfect Budget is the entrance to the financial planning. Second immediate requirement is to become debt free. No financial planning gives success to any individual who are always living in huge debts and no planning. Prior to move further, assess, identify and eliminate debts.
Funds for Rainy Day..
Another well known term and must complete step in a personal finance planning process is having an ‘Emergency Fund’. Having an emergency fund give protection from all unexpected money burdens throughout the financial planning process and afterwards. Thus creation of emergency fund is a must in financial planning..
Measures of Protection
Next step is to have knowledge and prepare for the protection of self and dependents. An individual should have good knowledge on the status of self and family to understand how much protection required through insurances. He or she should be able to identify the areas where the actual protection required. This can be a health, motor, life, asset or more, depends upon each individual and their requirements. Once identified, identify the best insurance plans that suitable to your requirements.
Automatic Saving Possibilities
Once completed with above steps, you should now have a good budget in place, no debts or having right plan to become debt free soon and ready to meet any uncertainties through emergency funds and well protected along with family and assets with required insurances. From the point, one should decide on possible savings and investments. To prepare for investments, plan how much you can save and invest. Consider auto saving facilities like employer funds, recurring deposits, sweeping accounts etc.. Plan to generate additional income through possible part time jobs, businesses etc… Consider saving money through implementing various actions.
Investments to Meet Future Goals
Once you have balances in hand, it is the time to plan and start investments. Of course, this is the right time to select a ‘Good Financial Planner’ to plan your investments. A good financial planner can guide you through right investments at right times. Whenever start investing, it is always advised to go with systematic investment.