A financial plan plays an important role in achieving your financial goals. Let’s understand why its important for you and your family’s future.
There is a famous quote “if we are failing to plan then – we are planning to fail.” Today’s generation despite earning a good salary lacks proper guidance and direction of financial planning for their future aim. Most people don’t even have any financial aims for their future.
Salaried employees hardly get any time to think and work on their financial planning. If they find the time, they don’t find the proper guidance to follow. Their 9-to-6 job for five or six days a week along with their travel in heavy traffic leaves no time to think about anything apart from their daily routine.
Most of these people never do financial planning and later have to start their financial planning to recover similar to the person consuming medicine to recover after contracting a disease. In simple words, financial planning is actually a vaccine that should be taken much before.
To be honest, future security comes froma good financial plan. We all hope we will live well past our 75 years, however, how many have thought of these questions below:
Will you be financially independent at that time?
Do we have an income or savings today that will help you tomorrow?
Will the amount we have would enable us to be financially independent at the time we will not be earning as good as today?
Friends, here comes the importance of Financial Planning. A financial plan can help you survive mostly in bad times, and keep you away from the trap of loans. Let’s check out in simple language How to do Financial Planning and dig deep dive into it:
1. Set your Financial Goals today:
Create two sets of financial goals, Short Term Goals (how much money would be required in the next three to five years) and Long-Term Goals (how much money would be sufficient after the retirement for a living and have a working plan to get decent returns).
Divide the amount as required for your short-term and long-term goals. Create a balanced flow between both of them. Try not to disturb this planning until an emergency arises. It will help you achieve your short-term and long-term goals successfully.
Decide how much money would be required for your goals and if you want to achieve it, financial planning is all it takes. As there is an expert dietician for a good diet plan, similarly there are financial advisors available to help you create a financial portfolio for you. Get this step done today itself.
Hot Tip: Decide what you want at various phases of your life, set your financial goals accordingly. Write down all the possible steps required in sequence from start to end along with a time stamp on them. Start working on the first one today itself.
2. Manage your finances:
Financial goals must be managed well according to the financial plan set for them. It’s easy and could be possible. It helps you in anticipating and balancing how much money would be required for monthly expenses, holiday trips, kitty parties, income tax, and unplanned expenses.
3. Note down your cash flow:
Most people despite earning hefty salaries don’t even know where their whole salary is spent and fall into the situation of lending money from friends etc. before the month-end. I recommend you to make a financial journal, where you jot down your weekly budget, and track your extra expenses. Track your cash flows regularly until you become an expert in managing it. Carefully monitor all your spending habits. This habit of tracking will help you become more cautious towards your expenses.
The more money you will save, you will find extra for investments. Invest wisely so that you can make your hard-earned money work for you.
Hot Tip: There is a famous quote – “Something which is not measured or tracked, never gets improved” or it would not be incorrect if you say “If you can’t track your expenses, you cannot improve your financial condition.” Start tracking every major or minor expense from today itself.
4. Keep family at priority:
All our goals are incomplete without our family. So, the financial plan is also incomplete without keeping the family in mind. Having a proper insurance cover and all the policies in place will give your family the protection and will you achieve peace of mind and breathe easy by ensuring that your existence or absence will not impact much on your family’s financial future.
Hot Tip: Cover yourself with life insurance for your family’s future.
5. Choose the right investments:
If Investments will be done properly, its outcome will be outstanding. Investments help in financial planning to achieve your objectives and goals with a surplus amount of accumulated wealth in need of an emergency. Every person has his own financial requirements depending upon his personality, lifestyle, and needs. Similarly, the investment plan has to be unique for every individual.
Hot Tip:Choose the right investment plan keeping the strategy to fulfill short-term and long-term goals at the right time.
It’s true that overnight success or wealth is common in dreams or films. In true life, it’s hard, sacrificing, and takes time to become rich & wealthy. However, without a proper financial plan and set of goals becoming rich is still superficial.Your lifestyle plays an important role in your financial plan.
If you will not be careful, your lifestyle or your living standard can turn you from rich to poor in a short span of time. Your standard of living should never be dependent on credit cards. The savings done with good planning on lifestyle will always prove beneficial.
Hot Tip: Financial Planning will help you a lot in sticking and not exceeding the amount spent on living standards. It helps in the long run to achieve your goals.
7. Financial Education:
You don’t need to go back to school or college to gain knowledge about finance. In finance, there are two terms mostly used, Assets and Liabilities. You just need to understand these two terms. The world’s richest people understand these two terms very deeply.Your financial plan will help you build Assets.
Let’s understand Assets and Liabilities with the help of an example. Suppose your friend is going to buy a car. You know it loses its value the time it’s out from the showroom and adds an extra expense on the financial plan. By this example I don’t mean buying a car is a liability for everyone. It depends. It’s a liability for those who hardly drive it even once a month.
The idea here is to gain a level of understanding of finance which will lead to managing your lifestyle and your budget. More assets and less liabilities in your life help you avoid unnecessary burdens or loans in the future.
Disclaimer: Not to offend anyone who is planning to buy a car or already have it. The point here is more liabilities might reduce your chances of achieving your financial goals.
Hot Tip: If you want to become rich, buy mostly assets. Think from the prospectus before buying anything, will it add to my asset or liability column. If the answer comes liability, take a deep breath and clearly say No to that buy.
On the contrary, if you don’t any liability and also no assets, then also it’s a condition of being poor. By asset, I mean something which increases value in your life and its value should not go down. In short buy assets in your life rather than liabilities.
8. Develop a Skill – “How to save?”:
Try to save a decent amount for a rainy day and also when it doesn’t rain. The inflation rising daily, monthly, year by year can take you off track if you don’t have a proper financial plan. The savings set aside in your financial plan helps you in distributing your money and utilize it in times of emergency rather than disturbing other funds kept safe for short-term or long-term goals.
Hot Tip: Money saved is money earned. Try adding at least some amount in your piggy bank to develop a habit of saving in your subconscious mind. It works.
9. Add charity fund to your Financial Plan:
Its seen from the history of records that nobody got a name or fame without charity. I think it should not be for name or fame, it should be for your self-satisfaction. There are a lot of things we have by the grace of God, and we find so many deprived people from all those facilities. We can share a few things we don’t use to give them the privilege to use and enjoy.
From your charity fund, you can arrange food for some poor people or maybe for animals. At least keep a small amount of fund which you can best utilize for the charity. Try giving something back you earned to the world to get real satisfaction.
Remember giving money to the poor is not just charity, however, bringing change in someone’s life out of your charity fund could actually be a charity.
The whole Story Cut Short :
A financial Plan helps you secure your financial future and also in achieving your short-term and long-term goals. Plan it in a way that can be calculated and seems feasible. Add the emotional value to your financial goals & future. When you get emotional about what you want, things begin to happen. It could be done in consultation with your life partner or with your financial advisor.
Every individual in the family has his own financial needs, hence a financial plan should be customized and a complete assessment of current financial circumstances should be done beforehand. Decide what all things you could afford to buy this year from the budget in your financial planning and work hard to achieve it e.g., You are planning to buy a 7 Kg Front Door Washing Machine. If it would be in the plan, you would most probably not go wrong with the product and it will be an asset for you.
So, it is important that a well-defined financial plan should be developed by knowing what’s good and suitable for your future. Thanks a ton for reading my blog. If it’s beneficial for you, do share it on Social Media, and don’t forget to Subscribe from the top.