Personal financial planning means having financial goals and then taking systematic steps to achieve them. It is a method through which you can keep a balance between your wants and needs. While you might have a personal finance plan, its success is never guaranteed.
An extended shopping spree, an outstanding credit card bill or a sudden emergency expenditure, all these are enough to throw your finances plan out of track. However, if you plan your finances taking into account every possible gap, your financial plan can be a success too. Here are a few ways to do so.
- Identify your goals and objectives
Defining your goals and objective is one of the most vital steps for successful financial planning. Your goals should have all the SMART elements. It should be Specific, Measurable, Achievable, Realistic and Timely. While setting your goals, objectives and targets, envision your future, asking yourself questions like what all you want to achieve, where and how you see yourself and how much amount do you need to reach there. Also, though aiming high is a good thing, ensure that your goals are realistic, which can complement your financial plan and help you achieve them turning it into a success.
- Ascertain your present status
You can never reach on your destination successfully on time if you do not know where you are starting. Similarly to achieve a financial success it is necessary to ascertain where you stand at the current situation. It is necessary that you have a clarity of your financial information, regarding your assets and liabilities, expenses and receipts. Moreover identify your risk tolerance and capacity, along with putting down all your obligations including taxes and debts.
While looking at the financial aspects of your life distinguish between your financial strengths and weakness which will help you manage your money well.
- Execution of the financial plan
A financial plan can never succeed if you do not put it into action. Often this is the most difficult part yet most important. Sticking to your financial plan demands a lot of determination and people often fail to do so. You might deviate from your plan due to change in circumstances, or mood that can defeat its overall purpose. One way to avoid is to divide your goals and objectives into short term and long term and tagging them into deadlines.
An important way is periodical review of your financial plan. Your goals, financial position and circumstances can change with time. Therefore it is necessary that you review and revise your financial plan accordingly.
- Have an inclusive financial plan
There are various ways to create a financial plan which ultimately aims towards your financial stability. However to ensure that your plan is successful, it is essential that you include all the required strategies. These are risk management, tax planning investment management, retirement planning, debt management, etc. Debt management is significantly important if you are trapped in debt trap. Adopt a debt repayment plan and build your credit history.