We all make financial decisions on a daily basis. Sometimes you can see those decisions coming to plan accordingly, and sometimes they catch you off-guard. To make it work for you, it is recommended to take some time out and plan long-term financial goals that surpasses unforeseen circumstances. You may want to buy your favourite car, go on a cruise in the Caribbean or purchase a property. All these wishes depend how well you have planned your finances in the past.
What is Personal Financial Planning?
Personal financial planning is about making calculated decisions that permits you to get closer to your desired goals or sudden decisions that allow you to stay on track, even when things take an unanticipated turn. Personal finance covers managing your money as well as savings, investments and retirement planning. It is a life-long process and can go on until the very end of one’s life.
The process of personal financial planning is a little complex as it involves a certain number of factors to consider:
Setting long-term goals – such as buying a property or sending your child abroad for education
Short-term goals – such as creating and following a monthly budget or reducing the use of credit cards
Creating goals – Sticking to and prioritising financial goals.
How can I manage my Personal Finance?
To be financially independent, it is best to write down your personal financial goals. One needs to take a strategic approach to managing finances, simply working hard will not guarantee a prosperous future. It all depends on your income, expenses, lifestyle and individual goals and desires.
It is safe to say that young professionals are in a much better position to benefit from the long-term advantages of financial planning and investing as they will likely receive benefits of compound interest as compared to older generations.
Strategies that work best for Personal Finance
The idea is to start financial planning as early as possible. How often do we sit and discuss financial planning with our family and decide how to save and invest our hard earned money? It will not be wrong to say that these are neglected discussion points.
The following are a few steps that we must take to ensure a healthy future:
Establish a Plan – With so much negativity and insecurity around us regarding health and safety, job loss fears, maintain standard of living, it is wise to devise an action plan
Create a Budget – Living within your means and saving to meet long-term goals
Create an Emergency Fund - Without savings, relying on salary alone leaves you vulnerable. You need a buffer, a way to get back on your feet if the unexpected happens
Mind your Debt – Debt can be your worst enemy. Try to eliminate at the earliest
Pay Yourself First – As soon as you get that pay-check, save a portion and contribute in an investment plan
Retirement Planning – Set aside some money for your old-age and let it grow
In a nutshell, if you take these steps now, you will establish a strong foundation for yourself and live a prosperous life.