We admit that some time planning is boring, that requires seating on a study table think about future, analyze what you currently have and what you can potentially achieve. But, doing financial planning can significantly change your perspective about money and may greatly help you acquiring wealth.
Financial Planning is a logical 6-step procedure and following these steps you can plan your finances like a professional.
Step 1: Determine Your Financial Situation At Present
To start your financial planning, first, you need to determine your present financial situation concerning current income, savings, living expenses, and debts. Prepare a list of all your current assets, debt balances and expenses on various items. Only then you can plan your activities for financial planning.
Use a mobile app that can help you build this list and also show charts.
Step 2: Develop Your Financial Goals
Financial goals are vital to financial planning. Financial goals can be short-term goals as well as long-term goals. The purpose is to differentiate needs from wants and to build savings and investments for future financial security. Goals can be, To buy a house in next 5 years, save for kids education, save for retirements, buy a beachfront property etc.
Step 3: Identify Alternative Courses of Action
While doing financial planning, good decision making is crucial, and that requires developing alternative courses of action. Following the situation, you may need to decide whether to continue the same course of action or continue with current situation. You may need to make such decisions based on recent outcomes after you started working on your plan.
Step 4: Evaluate the Alternatives
Based on the situations in your life, your values, and present economic conditions, you need to evaluate the available alternatives. You have to calculate the opportunity cost, and that is what you give up while making a particular choice.
You also need to evaluate the risks involved in the decision as there is some uncertainty attached to every decision you make. While some decisions involve high risks, some have comparatively low risks.
In making a decision, Financial Planning Information Resources are very crucial. With the changing economic, social, and personal conditions, you need to update your knowledge.
Step 5: Create and Implement the Financial Action Plan
In this step, you need to develop and implement your action plan to achieve your goals. First, focus on accomplishing your immediate or short-term goals. Then you should focus on the goals next in your priority list.
Step 6: Review and Revise Your Plan Annually
As Financial Planning is a dynamic process, you need to assess your financial decisions regularly. Changing socio-economic and personal factors may require more frequent assessment. Regular review of your own choice and revision if required will help you to bring the financial goals and actions in line matching the current situation.