What is Financial Planning?
Financial planning is simply the process of coming to terms with your life goals and objectives through the proper management of your funds and finances. Types of aims and objectives may include buying a house, purchasing a car, saving up for your child’s education, and even choosing to go on holiday to a tropical destination of your choosing.
It can also be defined as a continuous and ongoing process that assists entrepreneurs to make sensible and ideological decisions aimed at propelling them to achieve set targets.
A financial plan might therefore involve:
- Establishing appropriate wills in place to protect your family in case of death
- Spending money differently
You can formulate your own financial plan or strategy, but if your needs are complex, it is recommended that you seek guidance from a financial advisor.
Steps in Creating a Sound Financial Plan
- Establish your goals in life
For entrepreneurs or business people, it is necessary to identify your long term and short term goals. These goals may include various aspects from purchasing a car, expanding your current business, the addition of goods or stock of commodities, payment of employees, buying of furniture, repairs, and many more factors that one needs to consider.
- Determine What Assets and Liabilities You Have
Determining the number of assets and liabilities is a critical measure as it helps the entrepreneur formulate a good book of accounts. Financial bookkeeping is essential as it provides the businessman or woman with a proper record keeping mechanisms, which goes a long way in assisting one to manage and run his or her business enterprise.
- Evaluate Your Current Financial Position
Take note of how close you are in achieving your goals and objectives. For individuals who are nearly there, it is recommended that they use little funds as they would only be looking to add some finishing touches. However, if you have set long term goals and are far from achieving them, then set aside sufficient amounts of resources to reach your set targets.
- Develop Your Plan
Craft your own unique “route map” for achieving your different objectives. It is advisable that one sticks to his or her own strategy, trusting in his or her own instincts, and so as to arrive at the set goals or targets.
- Implement Your Plan
Once you have your financial plan, and then put it into use. This is by, making the much-needed changes, and follow up on this changes until you get the desirable results.
- Monitor and Review Your Plan
The final step is to monitor and review your plan at least once in every year, and if needed make the required adjustments.