A comprehensive financial plan can enhance the quality of your life and increase your satisfaction by reducing uncertainty about your future needs and resources. The specific advantages of personal financial planning include. Most people want to handle their finances so that they get full satisfaction from their money. Typical financial goals include such things as a new car, a larger home, advanced career training, extended travel, and self-sufficiency during working and retirement years. Here are a few steps in financial planning.
Determine your Current Financial Situation
This step summarizes your present financial situation as a result of your decisions and actions in the past. Prepare a list of current asset and debt balances and amounts spent for various items gives you a foundation for financial planning activities. Take a look through your current income, savings, living expenses, and debts( if you have any).
Develop Financial Goals
Having in mind your financial situation at the present moment, you can easily make a plan of your your financial goals. The financial planner will help you identify your financial and personal goals and objectives with time frame. Examples of such goals may include providing for children’s education, insurance for life as well as health, buying a house, marriage of children and retirement. The purpose of this analysis is to differentiate your needs from your wants as well as to help you organize your priorities.
Evaluate Alternatives and Risks
Sometimes making a decision for your future means to give up on something. For instance, going to the University so that you can get you dreamed job after a couple of years, means that you will not be able to find a full time job now. This is the reason why this third step is so important, because it helps you again to rearrange your priorities and get used to the idea that future benefits require some sacrifices. Another issue of the problem is that every decision is followed by uncertainty. In many financial decisions, identifying and evaluating risk is difficult. The best way to consider risk is to gather information based on your experience and the experiences of others and to use financial planning information sources.
Provide Alternative Solutions
When you start creating your financial list of goals, don’t think of the possibility that something can go wrong all the time. But it is a good advice to provide yourself a wise alternative, which can prevent a possible failure. Always have in mind that there are some factors, which are out of your control and no matter how hard you try, they can still remain as a barrier. Write on a sheet of paper some possible situations and solutions for each of them and put it in some drawer. And if one day you run out of ideas or you change (or expand) your current situation, you will find this sheet of paper as pretty useful helper.
Periodic Review and Revision of the Plan
In a dynamic situation, there may be changes in the general economic conditions as well as your economic condition. Once in a while review and revise your financial plan, if necessary. See if you have achieved any of your previous goals and scratch them from the list, or add something new. Compare your financial situation now to the one you were in five moths ago, or an year ago.
Morgan Johnson is a manager in BinaryTribune. He has years of experience in the financial business. In his spare time he likes to write and share his knowledge.