As an individual, the principles of applying personal financial planning in your daily finances help balance your monetary decisions wisely. Through personal financial planning, you can obtain your budget, savings, expenditures, and other financial resources to determine your financial status, which can be very useful for future events such as accidents, retirements and others.
There are several components for personal financial planning that you need to know to ensure that your finances are properly recorded. These components include income tax management, insurance policies, social security benefits, retirement plans, stock market investments, consumer loans, credit cards, savings and checking accounts.
Personal financial planning is a dynamic process and it requires regular re-evaluation and monitoring. Generally, there are five things you need to do to achieve successful personal financial planning.
Estimation or Assessment
In personal financial planning, you can estimate or assess your finances by compiling your own simplified versions of balance sheets and income statements. With your personal balance sheets, you can list the values of your assets such as car, bank accounts, stocks, clothes and house, along with your liabilities. Meanwhile, for your income statements, you can list all your cash flows such as incomes and expenses.
Learn to establish goals for your personal financial planning to help you focus on your directions. You need to set goals not only for the short term but for the long term as well.
Compose a Plan
A financial plan is very useful as it contains details on how you should go about accomplishing your goals. It can help you reduce unnecessary expenses, invest in the stock market and increase your employment income.
It is essential for you to have discipline and perseverance while managing your personal financial planning. With these two attributes, you’ll definitely obtain the goals you set.
Auditing and Reassessment
In the duration of your personal financial planning, you need to audit and reassess all possible adjustments. This is one way to balance your balance sheets and income statements.
These steps for personal financial planning are created and designed for those who can’t afford extensive planning assistance from professionals. In the broadest sense, personal financial planning involves every aspect of financial management, and it also provides basic understanding on moneymaking decisions.
For better personal financial planning management, you may also try some online curriculums from certain accredited universities and colleges that teach the psychological aspects of money management and the practical mechanics of spending and saving. Most of these online curriculums are interactive and they include assessments that help you evaluate the management of your money.