Financial Planning isn’t just budgeting; it is a much bigger picture than we’d generally anticipate. To a great extent, every one carries it out in one way or the other in the form of planning how our income gets divided for the month or how to make debt payments and the like. Generally, one makes Financial Plans only when one has the need to, however to foresee the needs in advance and to plan today for tomorrow is the true essence of Financial Planning.
Personal Financial Planning, as compared with Business Financial Planning, is less complex. Nevertheless, it still takes great effort and discipline in creating an ideal financial plan for oneself. Before getting into how to make a Financial Plan, it is important to identify what elements need to be covered in it. It must essentially include the following:
- Income/s: Identifying, tracking and monitoring all income sources and projecting an estimated increase or decrease.
- Savings/Investments: Recognizing avenues and creating future commitments leading towards wealth creation.
- Expenses: Anticipating the expected expenses and mandating timely payments; Understanding and reducing unnecessary expenses where and when required.
- Debt management: Knowing the level of risk one can take and managing debt ratio
- Retirement Plan: Preparing yourself for a relaxed retirement.
- Taxes: Ensuring legal compliances with regard to taxes
- Insurance: Keeping you safe and managing day-to-day risk from unexpected forthcomings.
A financial plan must appropriately cover the above elements clearly in order to be prepared for the future.