Identifying goals are very essential as without them you don’t know where to go. The first step of the financial planning is to identify goals. Once, you have identified it, you should calculate your current financial standing i.e. your income and expenses, your savings and find ways to achieve them.
Financial planning is consciously deciding why, how, when and where to save and invest money in an effort to create a financially secure future. This includes objectives; the cost-current and assumed future cost, time horizons, savings/investment methods and projected rate of return (ROI) required for achieving these goals.
Our financial goals must be specific, realistic, measurable, attainable and timely. This means we must clearly understand, exactly what we want to achieve and define our requirements and constraints. Understand if these goals are realistic and within reach. Measure how much money will be required and how will you get to know if you are on the right path. Ask yourself if all this seem consistent with other financial goals and responsibilities? And lastly set an achievable timeline and make adjustments to achieve short-term goals in order to achieve the long-term goals.
Planning the finances has numerous benefits. Whether you do it yourself or take paid services of a professional, you must have a good understanding of our financial plan and save you from uncertainties or crisis.
Personal financial planning plays a very important role in the accumulation of wealth by directing our financial resources towards the most productive areas.
The financial planning is a continuous effort which helps you accumulate sufficient money to spend not only during your working years but also in your golden years. It considers all important elements of a person’s finances to fulfill financial goals.
To make the financial process simple we can follow the following steps:
1.Define financial goals
2.Develop financial plans and strategies to mark a path to achieve goals
3.Sporadically develop and implement budgets to control spending and progress towards goals
4.Take corrective actions when required
5.Redefine goals and revise plans and strategies with change in personal circumstances.
Have clarity of thought regarding the goals and utility you want from your money in future. Convert the value of money into the assumed utility to know the best estimation of your targeted savings. Financial planning will help you fill the gap between the existing financial standing and expected accumulation of savings.
The money treats us the way we treat money. People have different kind of attitude towards money they have. Some of us are hard core spenders. These people find it difficult to save money. They are shopping freaks and prefer the tangible value of money rather than the intangible bank savings. The next category is that of builders. These people get thrill in multiplying their money through savings and investments. They use money to achieve their goals and are ready to take high risks. The next set of people is the givers. These people are not inclined to save money for themselves. They are rather selfless and help others and enjoy self-satisfaction by serving others and making society a happy place. They often ignore their own financial planning. The last category is that of savers. They are risk averse. They like to save money and keep it to themselves and their wealth grows slowly. It is advisable to be in the savers category rather than be spenders, builders or givers. Following a customized Retirement Plan made exclusively for you, saving and investing as per your goal will make a difference in the long run. This will not only help you reach your goal in time but also build a decent retirement corpus.
We need to differentiate the immediate goals, short-term goals and long-term goals, as each is essential to attain the other. They form the basis of the financial plans. And financial planning forms the basis of a secure financial future.