Financial planning enables you to track every rupee and make the use of money wisely.
By considering your current financial status and future wealth, you can create a financial plan that will satisfy the needs of the present and the future.
There are two benefits of leading a life with a financial plan: it protects you from debts and helps you in an emergency.
Are you looking for the steps that can help you in creating financial plans? If yes, then you have reached the right place.
In this blog, we will tell you the steps to successful financial planning. So, let’s get started.
5 Steps to do Financial Planning for the Future:
Step1: Know where you stand
The first step in creating a financial plan is to understand your current financial situation. You can define your position by considering debt, income, and expenses.
Create a list for your current assets-
- The balance in your current and savings account.
- Real estate property.
- Insurance.
- Stocks and bonds.
- Mutual funds.
- Fixed deposits.
- The market value of your home and office.
Include all your debts-
- The balance of your credit cards.
- Home EMIs
- Student loans.
- Auto loans.
- Personal loans.
Now subtract your debts from your assets to determine your current financial condition. If you get a negative number means your assets are insufficient to pay the debts. Although it doesn’t provide you a clear picture of financial health, it gives you an overview.
Make a list of your expenses:
- Home rent.
- Food.
- Electricity bill.
- Travel expenses.
- Cable and phone bills.
- Debt payments.
- Utilities.
Now compare your money with expenses and determine your cash flow. This step will surely tell you where you are standing right now in terms of finance.
Step2: Set your goals
The second step of the financial planning process is setting your goals. Your financial goals must be real and unique that will take you where you want in the future. Creating a realistic plan can help you in achieving goals in a timely manner.
Common financial goals are-
- Pay off debts.
- Saving for children’s education.
- Saving for retirement.
- Buying a home and car.
- Investing in mutual funds and stocks.
- Saving for a vacation.
Now you need to determine how long each goal is expected to take. For example, savings for retirement is a long-term goal, and savings for a vacation is a short-term financial planning process.
Step3: Plan for the future
You know where you are standing right now in terms of finance. The third step in financial planning is to create a plan for achieving each of your goals. Consider your income and expenses when creating a financial plan for the future.
Step4: Managing Money
A good financial planner is the one who knows how to manage money wisely. There are several ways to invest and save money, you can get the idea by reading the best personal finance blogs in India.
If you are going to invest in the mutual funds and the stock market, consider your risk tolerance. Invest the money that can bear the risk of losing it. Secondly, never go for a longer-term investment Banking if you know that you will need money in the next two years. Lastly, invest in insurance, mutual funds, and other investment resources to save your taxes.
Step5: Review your plan
Once you complete your financial planning process, don’t rush, take time to review your plan. And every one week, analyze whether you are following your plans or not.
Conclusion
We hope this comprehensive guide on the financial planning process helps you a lot. To enhance your financial status, it is advisable to read the best financial blogs in India to update yourself with the best investment process strategies and tax savings plans.
