financialtreat – will explain The Importance of Making a Plan About Financial which you will get in the following article. let’s look at this article carefully!
In doing anything, making a plan will make the things you want to do become more organized as well as financial planning. Own plans are needed for anyone who wants to be faster and more effective in achieving goals.
Financial planning is a strategy to achieve life goals. Careful financial management is very important to support our lives today and in the future for the better.
The Importance of Doing Financial Planning That Is Often Overlooked
By viewing each financial decision as part of a whole, one can weigh the short-term and long-term effects on one’s life goals.
He can adapt more easily to life changes and feel more secure because his goals are on the right track. In preparing financial planning, a person will be influenced by the conditions (live event) he is experiencing so that financial planning will be specific.
Financial planning is also a continuous and dynamic process. At some point, the plan may require adjustment. The following are some conditions or events that can affect a person’s financial planning:
- Marital status (unmarried or married)
- Working conditions (already have a permanent job or not)
- His age (increasing age)
- Family condition (number of dependent family members)
- National economic conditions (easy to find work and income)
- Education level (education level affects income), and
- Health conditions (affecting costs and continuity of income).
- Changes in one or more of the above conditions can affect the financial planning that a person or family has made. So often one’s financial planning must be rearranged (dynamic).
- Benefits of Financial Planning
Here are some of the benefits of financial planning that you should know:
The benefits that can be obtained from financial planning are to allocate personal and business finances that you run. By making a list of financial planning, the company’s finances will be allocated to finance all interests that can have benefits in the company’s line. Likewise for personal needs.
Financial planning can be a bridge to increase productivity. The trick is to plan financing for untouched productivity lines, which is preceded by a meeting or mutual agreement from each party who has the authority within the company’s scope.
Good financial planning should include personal life, risk choices, and future goals. It is used to choose the right investment according to your needs, goals and personality. Financial planning helps you plan and create financial assets for the future.
Achieving Long-Term Goals
Most people have the same long term goals in life. For example, such as buying a house, buying a car, paying for children’s education and getting married for their children when they are adults.
It is undeniable that these goals are very important to achieve. Financial planning helps you develop an accurate plan to achieve your goals within a certain period of time by preparing all the risks that can be taken to obtain results that are closest to long-term goals.
Why Financial Planning Is Needed
In achieving a goal, we need to do a plan. Without realizing it, actually in this life, you must have planned to achieve a goal that you and your family want.
For example, there is a mother who is preparing her first child to enter elementary school. The mother will definitely find out which school is suitable for her child, then find out how much the school costs, and in the end find a way to raise money to buy school uniforms, buy textbooks, and pay tuition fees.
How to Make a Financial Plan
Everyone who has a targeted financial plan generally feels more in control of their finances” and can live more comfortably than anyone else. To help put together a realistic financial plan, here are eight simple steps:
1. Ask yourself: What are your future goals?
Even though this is a cliché question, you need to answer: “Where do you want to take yourself in 5, 10, 20 years?” and “What do you really want in life?”
Don’t answer with something general like: “I want to be rich” or “I want to travel the world.” Create a more specific answer.
2. Know your current value
You will never get to your destination if you don’t start walking. This is the step where you need to pull out all your notes and grab a calculator to make detailed calculations.
Gather as much information as possible. You need to list your assets: from your house, car, savings, and investments. Next, write down what you owe: mortgages, car loans, credit card bills, and so on.
All income and investment results. Don’t forget that you also need to check expenses. Counting all this will let you know exactly how much value you currently have.
3. Check your current Fee
You need to find out where your money is going. Provide a mini notebook and record in detail every expense that comes out. You can also create a Word/Excel document that can detail your expenses, from basics like food, shelter, and transportation costs.
Make this a habit every month. Through the actions you take like this, you will know whether you have used them wisely.
4. Start Saving
There are many rules of thumb about saving. Some say save 10% of your income. There are also those who say to always have an emergency fund of at least three months’ worth of income. Start to cut some expenses, without killing all your fun. Make sure you save as much as you can.
5. Pay Your Debt
If you currently have debt with high interest, you must immediately arrange your finances to pay it off. High-interest debt goes into the rate of return you get on your investments and can swallow up any income earned in a savings account. Clearing your debt will also erase your credit score for the future.
6. Build Your Investment Portfolio
More than just a savings account, an investment that will take care of you throughout your retirement. Some basic but important investment rules:
Always do your research before jumping in. Understand the rules of risk and payoff: the higher the risk, the higher the potential return – and vice versa.
Try to diversify your portfolio: start investing in different forms and types, so that if one investment fails, you won’t lose too much.
7. Insure Yourself
Life is an unpredictable journey. Sometimes terrible accidents happen. It’s hard to buy life insurance when you think you’re in good health, but if you don’t it means you’re putting your future plans in jeopardy.
Buying life insurance is best done earlier than later. Life insurance will ensure that the financial plan that you have built smartly will not run out in an instant.
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8. Monitor Financial Plan
If you are really passionate about achieving your ultimate goal, then this step is the most important step. Check your progress annually. Ask yourself:
Have I paid off my debt? Can I save more money? Is my investment going well? Am I trying enough to achieve my goals? Reviewing your financial plan annually will keep you in better shape in the long run.
Well, that’s a smart way to manage finances, the point in managing finances is where you can put your income into the right portions. In addition, an explanation of the benefits and importance of managing finances that still not many people know.
Sometimes, people are very ignorant of financial planning, when in fact it is very important. Let alone for a business and company, even personal finances must be managed properly.
Because the impact of financial problems will quickly be felt when we are negligent in planning. Hopefully this information can help and provide additional insight.