Financial planning is a process that involves setting goals, developing strategies to achieve them, and following through with the necessary steps to implement those strategies. Financial planning is not just about retirement. It also includes education, buying a home, and saving for emergencies. There are several steps involved in financial planning:
- Establishing goals
- Developing strategies
- Implementing strategies
How to do financial planning?
Financial planning is identifying, assessing, and managing personal financial resources for the present and the future. For instance, assets, liabilities, and equity. Assets are owned and have economic value, and you can think of assets like buildings and, or cars. A liability is a financial obligation that the company owes to someone else, and the company might owe money on a loan it took out to buy the building. Equity is the residual interest in an asset that remains after deducting liabilities from assets. The following are some steps of financial planning for beginners: establishing goals, developing a budget, saving for retirement, investing in stocks and bonds, and paying off debt.
To budget your money, you need to know how much of a certain amount is spent each week. You can use a pie chart to see visually which category of expenses is going the highest percentage. For example, if you notice that one category is going over 50% of your total monthly budget, it may be worth looking into whether there are ways to decrease that percentage.
Effective strategies of financial planning in India
Financial planning for beginners is not as critical as developing strategies for business finance. Beginners just need to know a few basic facts, mainly the key strategies to becoming an efficient financial manager of your own life. Here is the list.
- Manage money – Keep track of how much you earn and how much you need to spend on necessities. Fix a certain amount of money for spending on necessities and the rest of it for saving.
- Regulate expenses wisely – Always remember, never spend more than you earn. It will always cause you to be indulged in more debts and financial planning risks.
- Maintain a balance sheet – It will help you efficiently list your critical assets like investment, bank balance, home value, and many others. This way, you will be able to know what you owe and what you own.
- Create personal investment portfolio – If you can develop your investment portfolio, then think of it as an achievement because it would be the first crucial step toward wealth accretion and successful financial planning.
- Plan for retirement – If you think it is too soon to plan for retirement, it is wrong. It is never too soon to plan for retirement as retirement is not only mean you are old and no need for work. You can retire from work at any time of your life based on various reasons and situations.
- Manage debts on time – Always pay your debts on time. Or else, you will always find yourself in more debt, which will be the crucial obstacle between you and your efficient financial planning.
- Plan your taxes – It is always a significant part of financial planning for beginners to analyze finances from a tax efficiency perspective. You are free to claim several tax benefits to decrease tax liability.
You must follow these tips and strategies for a great financial planning for your future. Each and every point is significant to say the least.
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