However, not many people are aware of the process involved in financial planning. Based on your financial position, it is very important to go ahead with personal planning because if you don't start planning well in advance, then you might face several challenges in the future.
Financial advisors suggest all individuals follow these six basic key principles for financial planning.
• Analyse your current financial status: To be able to plan for future you should first be very confident about your current financial position. Make a checklist of all the assets and liabilities and your income and expenditure. Having this information at hand, you would be in a clear position to understand how you can achieve your financial goals. Your total financial worth would help you to determine the ways to accomplish your set goals, which include paying for your children's education, buying a new property or being ready for any financial emergency like the loss of a job.
• Chalk out your financial goals: In order to accumulate wealth, a lot of planning has to be done in order to achieve the desired goals. Setting goals would give you an urge to go ahead to achieve it. Your list of financial goals should be very specific, which would show that they are crystal clear in your mind.
• Plan for alternatives: You cannot expect your planning to go as per your wish, so you should always have a plan B at hand. After listing down your goals you plan for alternatives as well.
• Analyse the alternative options: You should ponder upon the feasibility of the alternative ways taking into account your social, personal and economic condition at present. The liquidity of your assets also matters in this regard.
• Creation and execution of your financial plan of action: Once you have planned about your alternative options and have analysed its feasibility, it is time for you to put these plans into action.
• Review your plan: Since financial planning is very dynamic process it is subject to change at any moment. So, it is always advisable to keep reviewing your plans every now and then.
Thus, in order to achieve your financial goals successfully, these basic points should be kept in mind for better handling of your finances.