Manage Your Personal Finances In 7 Easy Steps

Personal finance is the financial management that an individual or a family unit performs to budget, save, and spend monetary resources over time, taking into account various financial risks and future life events.

Financial planning is the process of developing a personal roadmap for your financial well-being. The inputs to the financial planning process are your finances, i.e., your income, assets, liabilities, your goals, i.e., your current and future financial needs.

The 4 steps to finance planning:

1. Step 1: Planning – Comprehensive Financial Planning

2. Step 2: Strategy – Develop a Strategic Plan

3. Step 3: Tactics – Create Specific Investment Tactics

4. Step 4: Monitor – Monitor Changing Conditions

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The main purpose of financial planning:

Financial planning is arranging to spend, save, and invest money to live comfortably, have financial security, and achieve goals. Everyone has different financial goals. Goals are the things you want to accomplish. For example, getting a college education, buying a car, and starting a business are goals.

A step-by-step guide to building a personal financial plan:

1. Set financial goals. It's always good to have a clear idea of why you're saving your hard-earned money.

• Create a budget
• Plan for taxes
• Build an emergency fund
• Manage debt
• Protect with insurance
• Retirement plan
• Invest beyond your 401(k)

Areas of Financial Planning:

• Cash reserve levels
• Cash reserve strategies
• Debt management
• Cash flow management
• Net worth
• Discretionary income
• Expected large inflow/outflow
• Lines of credit

The most important part of financial planning:

The most important initial element in financial planning is Budgeting. Setting a budget is relatively easy; it is more difficult to stick to it! However, having the discipline to take the time and care to record and reconcile your expenditure in some way is what counts.

 

The life cycle of financial planning:

Life-cycle financial planning helps to understand the dynamic nature of your family's financial risks presented and developed in a plan that evolves to meet those changing needs. The stages of life-cycle planning can be seen in 3 simple phases: Accumulation, Preservation, and Transfer.

 

Seven quick ways to set yourself up for success:

• Set up automatic deductions from checking to savings 
• Amp up your retirement savings
• Create a calendar
• Put bills on auto-pay
• Build a cash cushion
• Invest like a pro
• Make financial date night a regular event

Finance is the lifeblood of a business, and this is very crucial to any organization. Hence, utilizing finance without proper planning will be a fool’s act. The organizations force a special team for planning this fundamental factor. Planning involves estimating the future need of finance, its investment in key areas, and executing the return estimate – these activities are required to proceed for adequate functioning.

Written by: Jeevanantham G.