How Importance of Financial Planning for Future Life

Discussing financial planning does seem endless because finance is very closely related to our daily lives. One of them is to learn how to plan and manage finances to remain in a stable condition so that they can achieve a prosperous life. In this discussion, we will review more about financial planning and how to plan it.

What Is Financial Planning?

In simple terms, financial planning is an art as well as a principle that needs to be done to manage finances in order to be more effective and efficient.

This financial planning is important to be applied to everyone. Even as family

In order to achieve a prosperous life.

Things that need to be managed in financial planning activities are income earned, both routine and temporal income. This income management will then be adjusted to the needs of individuals and families. Own needs outline is divided into two, namely the current needs and future needs.

Current needs are all needs that arise in the present and are usually as routine needs. For example, household food needs, electricity, telephone credit, internet packages, and so forth. From the time period, needs now appear in less than 12 months or one year.

While the future needs are the needs planned to be issued in the future, such as the cost of marriage, children’s education, retirement funds, and so forth. And from the time period, future needs are needs that arise over a period of more than one year.

Why does finance need to be planned?

Financial planning is very important to do so that financial goals can be fulfilled effectively and efficiently. If we only use the money we have every time there is an income, then it is very likely that sooner or later our financial condition will deteriorate. If so, even the coveted prosperous life will only become a dream.

In addition, financial planning needs to be done because we never know what will happen in the future. At present we may have regular income received every month, but bad things can happen that we never thought of before such as stopping work, accidents, and so on.

With the existence of financial planning will really help us to be able to continue to meet the needs.

Basic Steps of Financial Planning

After understanding what financial planning is and why it needs to be implemented, then we will discuss what steps should be taken in it. The actual financial planning process is not complicated as long as we go through the stages regularly, regularly, and consistently. The following are the basic steps that need to be taken in carrying out the financial planning process:

1. Understanding Financial Conditions

The first step that needs to be done in the financial planning process is understanding how you or your family’s financial condition.

First is the data of all assets owned, starting from cash, money in accounts, houses, jewellery, and other valuable assets.

But keep in mind that not all items at home can be categorized as assets, only valuables that have the potential for high selling value in the future.

Furthermore, you also need to record the debt owned, both in the form of loans property, like as home.

Amount of debt will then show, about how many assets that owned with reducing asset that previously recorded.

If the total wealth that has been reduced by debt still greater than the debt itself, your financial condition fairly.

And vice versa, if the total wealth is smaller than debt or minus, it means that your financial condition is not good. That way, you need better financial planning to deal with it.

2. Record Target Needs

The next step in financial planning is to record the target needs, both current needs and future needs. If you have debts to pay, then paying off debts is included in your financial needs. Then make a target of how long these needs must be met, for example in a period of several months or so.

In addition, you also need to have emergency savings to deal with emergencies that have not been predicted before. With this savings, you can still at least meet the routine needs that must be met for both personal and family. Because it is important to enter emergency savings into one of the postal needs that must be met regularly.

3. Make a Priority Scale

Once the target needs have been well recorded, then you need to sort which ones must first be fulfilled in terms of priorities.

In case, is very important to distinguish, what is really needed and what is just a desire.  Of course, it is okay to fulfil your wishes and your family, but do not let the desires take over.

For example, the data needs that have been made there are several lists such as children’s education savings, home instalments, and buying new bags. If it is sorted in terms of priority, it is better if you pay home instalments. Only then can you pay for your child’s education savings, then you can buy a new bag.

Thus the discussion of the importance of financial planning and the steps that must be taken in carrying out financial planning. All of the above will be in vain if it is not implemented immediately and starts now. Maybe at first, it will be difficult to start financial planning well, but if routinized it will definitely become accustomed. Hopefully, this information is useful for

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  1. November 26, 2018

    […] How importance of Financial Planning for Future Life […]

  2. December 26, 2018

    […] 1 How Importance of Financial Planning for Future Life […]

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