Successful financial planning techniques is very important to meet out the unexpected changes in life. Every individual must have proper financial planning to face any given situation. A better financial planning will streamline our day-to-day activities and saves our family as well.
We do have variety of dreams in our life to accomplish – own house, cars/automobile, children’s higher education, children’s marriage, own business, pleasant retirement life, etc. We need to plan out everything much earlier to fulfill these dreams and we need to execute them as well.
What is an individual’s financial planning? To meet out the financial targets of our future, one need to plan the path to financial success. The purpose of financial planning is to make money available in our hands when we are in need of it.
The Process of Successful Financial Planning
Stage 1: What are your future financial goals?
Stage 2: To meet all each of these financial goals, how much money do you need in the future?
Stage 2: Understanding your current financial position.
Stage 3: Choosing the best investment options to meet your financial goals.
Stage 4: Monitoring the financial plans regularly and make necessary changes when required.
Step 1: Future Financial Goals!
Split your future financial goals into two. First one is for your basic needs and the second is for your other needs. First, you’ll have to plan out for the basic needs. Only then you can make your planning for secondary needs (other needs).
Basic need includes 1. Emergency Fund 2. Life Insurance 3. Health Insurance 4. Own House 5. Children’s Higher Education 6. Children’s Marriage 7. Peaceful Retirement Life.
Other needs (secondary needs) include electronic materials, sophisticated automobile/car, gold and jewelries, house interiors, farm house, etc.
Step 2: Money Required in the Future
You can find out the amount required to meet out today’s goal. Similarly, you can calculate the equation to find out the amount required in future to take care of certain things. For example, if today’s required amount is Rs. 8 lakhs to complete an engineering graduation, you can calculate how much it will cost you after 15 years for the same task. By knowing the average inflation of the country, this calculation can be made. A successful financial planning procedure needs the future needs, compulsory.
Step 3: Current Financial Position
To find out your current financial situation, you need to know the following factors:
What is your monthly income? What are your monthly expenditures? What is your monthly saving? What is the rate of your available assets as of today? What is amount that has to be paid back on loan if any? What is your net financial status has to be found out to know your current financial status. After finding out this, you can correct your financial position by going through it detail. Its good if this comes out positive but mostly it would be in negative status. Still, not to worry as we are planning to accumulate assets only from the age 30-50.
Step 4: Choosing the best investment plans!
Now, you have decided on your future goals and found out the amount required in the future to meet them all. Also, you have calculated your current financial position and based on that you would reduced the expenses over income to increase the savings. Now, all you need to do is to find out the best investment plan for your future.
Choose short-term and long-term investment plans. To meet your immediate financial goals, options like recurring deposits would be best. To take care of your long-term financial goals, investment in mutual funds, systematic investment plans (SIP) would be the best. Choose your investment plans accordingly.
Step 5: Monitor the financial plans and make necessary changes
Our needs and our goals tend to change during the course of time, which is quite usual. Certain things you may not be able to predict. All your financial plans would be linked with those unexpected changes. According to the changes that occur at your home or in your career or business, you need to make necessary changes in your financial plans as well. Every new year, soon after the celebration you need to go through the expected changes which is not in your plan and alter the financial planning accordingly. Unexpected happenings like, getting a new born baby at home, salary appraisal to you etc. should have impact on your financial goals.
You can be monetarily healthy by making out proper planning on your financial goals for the future. To meet out all your future financial goals successfully, follow these 5 steps to make successful financial planning and budgeting.