Personal Finance is a financial management on the part of an individual to make the future secured. People save their money today and look for investment opportunities so that they can enjoy the benefits in the future. However, managing the entire personal finance safely and ideally a number of matters are required to be considered and a detailed plan is required to be in place. Personal Finance may be associated with the prospective investments, retirement plans, savings and insurance plans.
The entire personal finance is a detailed concept and requires appropriate assessment in every aspect. Other than this the personal finance also needs to be planned by following a planning process.
Personal Finance Planning Process
The complete process of planning personal finance is based over six different steps that are required to be followed in order to plan a perfect personal finance.
- Assessment of Current State
The assessment of the current state at first is the most important part of planning the process. At first, you need to know where do you actually stand at the moment and for this you need to gather facts based on the availability of your assets, liabilities, securities and insurance plans. In short, you need to gather an insight of the value of all your belongings and obligations to analyze your current point of stability.
- Your Point of Reach
Once you have analyzed your current situation you need to benchmark the point where you wish to reach after the planning process. That is, you need to set up a goal for future which will be reached with the help of your personal finance process. This process is equipped with the short term as well as long term goals that an individual achieves with the passage of time.
- Barriers to Your Journey
When walking on the road of personal financial management you may come across a number of barriers lined up in your way. These barriers actually make the process difficult for you and therefore need timely elimination. The barrier may be in the form of cashflow problems, tax burdens and declining value of the investments. All these problems need to be resolved before placing your personal finance plan in process.
- Document your Plan
Anything when written turns out to be more effective. Moreover, you need to keep a timely check on the plan as well and might need to revise it as well. Therefore documentation of your entire plan is a must.
- Implement the Plan
Once you are done with all the basic things suggested above you need to implement your plan. However, the implementation of the plan must be open up for amendments, recommendations and all kinds of changes to be incorporated at anytime in the future depending upon the circumstances.
- Review Your Plan on Timely Basis
The plan you have created at first needs review on a timely basis as well. You need to ensure whether the benchmarks being set by are achieved and whether there is a progression observed or not. Moreover, there might be some amendments required at a later date that need to be reviewed as well.