financialtreat – will explain What is a Financial Plan and How to Create a Financial Plan that you will get in the following article. Let’s look at this article carefully!
Financial plan – It feels like just yesterday’s payday but today the money is running low. Do you feel the same complaint? There may be something wrong in the preparation of your financial planning. You need to set up a good financial plan to make it easier for you to manage your finances so that they do not run out quickly.
The purpose of financial planning is for financial flows to be used on target and to avoid waste. Therefore, let’s know what a financial plan is and learn how to structure it correctly.
What is a Financial Plan?
Before understanding how to plan finance, you must know the meaning of financial planning first. Financial planning is a way of managing finances wisely in order to achieve financial goals.
The term financial plan is often known as financial planning. The existence of good financial planning makes the income earned will not be in vain because of unmetered expenses. So that every rupiah collected can be maximized benefits.
Financial Planning Objectives
A financial plan without a purpose makes your financial planning useless. Therefore, it takes a financial goal to be achieved. Well, in order to make it easier for you to determine goals, determine the goals based on the time period, namely short- and long-term financial goals.
Financial Plan Components
The first major component in financial management is to create a well-planned budget. A budget is an important thing to be used as a plan for the use of funds.
So, to prevent the improper use of funds, you can make the budget made as a reference in allocating funds to various needs. The budget is made by entering the revenue figure, then compiling the number of needs that become expenditures. The more needs, then, of course, the amount of expenditure will also be higher.
Through this main component in financial management, you can prioritize the most important needs first as things that need to be fulfilled. While other needs that are not too important can be reduced budget or even eliminated from the budget. That way, you can save the use of funds.
Second, you must be disciplined in doing detailed financial records. All use of funds, both of large and small value, is well recorded. The habit of recording makes you know exactly what needs the money is used.
In addition, you also become easier to control yourself when you have spent too much money on less necessary needs. This financial component is usually done monthly. If you are not disciplined in recording the inflow and outflow of money, then it is not impossible if you will often be overwhelmed with needs for an entire month.
As a result, an imbalance in the flow of funds also occurs. You become financially difficult in old age, and get used to wasting money on the young date. This is a bad habit that keeps you from financial freedom.
Creating Financial Statements
The next component in financial management is making financial statements. All transactions that have been recorded, both for spending needs, savings and investment distribution, and others are compiled as neat reports.
In this financial statement, you can see the conclusion of the use of funds as a whole in a certain period of time. From this, it will look the effectiveness of the budget. Know exactly how suitable the use of funds is with the budget that has been made before.
Perform Internal Controls
If the budget, notes, and financial statements have been made with discipline and neatness, then you can control the use of funds more carefully. If you have seen a lot of expenses at the beginning of the month, then of course you can plan breaking expenses at the end of the month, so that your financial condition remains stable.
How to Make a Financial Plan?
In order to better understand the implementation of a financial plan, let’s look at the steps in preparing the following financial plan;
Determine the Financial Planning Goals You Want to Achieve
The first step in preparing a financial plan is to determine the financial goals you want to achieve. By knowing your financial goals, you will understand the biggest reasons why you have to make various efforts to achieve financial goals.
If the goals are not clearly outlined, then you may not commit and be easily complacent to spend money on things that are less important. In addition, the existence of good financial goals makes you able to determine the next step.
For example, if you want to buy a house within 5 years, then you have to manage your expenses and income as best you can. If you have drawn up a financial plan, it turns out that these income conditions are still not able to meet the nominal target to buy a house within another 5 years. Then you have to look for other ways such as increasing income or borrowing from the bank.
That is why the creation of financial planning must be realistic in accordance with financial conditions. To be clearly measured both income and financial expenses. Therefore, it is very important for you to determine the direction of your financial goals in order to easily determine the next step.
Record Monthly Financial Condition
After determining financial goals, the next step is to record all expenses and income both monthly and annually. It is useful to know the condition of financial health. The existence of a record of expenses and income allows you to control and evaluate expenses.
Suppose you always record every expenditure and financial income. Then haven’t stepped on the end of the month, it turns out that your money has run out. By looking at the record of expenses and income you can assess what expenses make money has run out before the end of the month.
If you find it difficult to record finances, try using financial applications that are widely found on the Playstore or Appstore to help manage personal and family finances.
One of the excellent ways to manage finances well is by frugality. How save money that can be done by making priority needs. So you only buy the necessary things.
Distinguish frugality with stingy yes. Even if you save money, you can still help others by allocating special funds for charity or donations. Frugality also does not mean killing your happiness to go out with friends to the mall or tourist attractions.
This can be done by allocating special funds for entertainment. However, you remain strict when it comes to expenses that are not so important. Start trimming some expenses is not important, without killing your pleasure.
Paying Debts on Time
Increased needs that are not worth the expenses sometimes make you forced to go into debt. Even if you have debt, you can still make financial planning. One way to manage a financial plan in the condition that you have debt is to make debt payments on time.
It is important that you pay the debt according to the time limit so that the nominal payment does not swell over time. Debt itself is not always negative. Debt can be a positive thing if used for productive things such as building a business. But debt can be negative if used to buy goods of a consumeristic nature.
Allocating Emergency Funds
Emergency funds are an important allocation of funds. The purpose of allocation of emergency funds is to prepare costs if at any time an unexpected event occurs. For example, the pandemic period that is being faced. Many workers were laid off so there was no income. Well, while looking for other sources of income, you can use emergency funds to meet your needs.
Emergency funds can also be used for hospital treatment costs, medical expenses, and vehicle accident costs. An emergency fund will make life more comfortable and no need to worry. Because when unexpected events are present and you need funds do not need to be difficult to find a loan.
Saving and Investing
Saving and investing can help you achieve your financial goals. The goal is that the assets owned are maintained and valuable in the future. There are many types of investments that can be tried ranging from deposit savings, and stock investments to mutual funds.
Choose an investment instrument that suits your abilities and needs. This step can also help you in earning additional income. If the investment generates a profit, it will certainly support your financial goals.
Benefits of a Financial Plan
Some of the benefits you can get through the right financial planning arrangement. What are those? Let’s look at the benefits of financial planning below:
- Ensure retirement funds during old age.
- Preparing funds for childbirth, adoption, to education.
- Prepare funds to deal with the financial crisis.
- Determine the allocation of funds for the care of elderly parents or disabled children.
- Anticipate the desired things such as death.
- Ensuring the availability of its own education funds.
- Ensuring the availability of funds to start a business.
- Manage the wealth owned that later becomes an inheritance.
- Preparing for marriage funds or anticipating the division of property if you have to divorce.
- Have an emergency fund.
Also read Financial Management:
Ready to Make Your Financial Plan?
To realize financial goals. You need to get investment advice and improvements in how to manage finances to be able to manage financial conditions properly. Thus the article I can make about the financial plan is hopefully useful, thank you.