All financial decisions and activities of an individual, this includes budgeting, insurance, investing, debt servicing, mortgages or more. Financial planning generally involves analyzing financial positions and predicting short-term and long-term needs.
Personal finance involves you monitoring your spending, budgeting, preparing for emergency, and paying down debts. It includes dealing with monetary resources and taking various financial risks and future life events into action. When planning personal finance, you should consider the suitability of your needs of range of banking products to investment and insurance products or participation and monitoring individual-or- employer sponsored retirement plans, social security benefits, and income tax management.
PERSONAL FINANCE PLANNING PROCESS
The key of personal finance is financial planning, which is a dynamic process that requires regular monitoring and re-evaluation. It involves five steps;
Ø Assessment of your financial situation by compiling simplified versions of financial statements. A personal financial statement lists income and expense.
Ø Goal setting; having multiple goals is common, including short-term and long-term goals. Setting financial goals help to direct financial planning and will also help you meet certain financial requirements.
Ø Creating a plan will detail how to achieve your financial goals.
Ø Monitoring and re-assessment of the financial plans for possible adjustments.
Typical financial goals most people have are off credit card and/or student loan debt, investing for retirement, investing for college lost for children, paying medical bills, and estate planning. The areas of focus of financial planning should be;
o Financial position: understanding net worth and household cash flow.
o Adequate protection against unforeseen risks.
o Tax planning: Understanding how to take advantages of the myriad of tax breaks when planning one’s personal finances can make a significant impact.
o Investment and accumulation goals.
o Retirement planning
o Estate planning
There are so many sources of finances for individual which may be equity sources, short-term (trade credits or bank overdraft), medium-term (leasing, debt factoring, and hire purchase) and long-term (ordinary shares, preference shares, and debentures). To learn more about financial planning, investment in shares, and more interesting topics that can help you get hold of your finances, subscribe to our newsletter or check our latest or trending posts. Thanks to y’all!
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