A regular source of income fulfils several requirements, from taking care of daily expenses to managing medical expenses. Although the income remains similar, expenses can fluctuate. You might wish to travel more, splurge on shopping, buy a car, or renovate your home. To handle all these sudden spendings, proper financial planning needs to be done.
While many people prefer taking help from a certified financial advisor, some choose to manage their monetary needs personally. While accepting assistance from financial planning services can be easier, a proper financial plan can also help you achieve a set of goals within just a few steps, which include:
Knowing your financial position
To begin making a plan, it is important to determine what are the facts regarding your finances. This includes knowing your income, debts, savings, risk tolerance, and daily expenditure. This step will act as the base for your financial plan as it gives you the chance to assess all your assets, liabilities, and how you spend your money.
Defining financial goals
Your financial planning and analysis depend on the current and future needs you want to manage with the plan. Your goals should include aspects like determining achievable goals, making a clear difference between needs and wants, and deciding on a clear timeframe for each goal. The goals can be both short and long term.
Once you have gathered all the information under the first two steps, it is time to strategize. You need to create a budget while taking into account your tax deductions, investments, insurance, savings, and goals.
Identifying and evaluating alternative courses of action
This can be considered one of the major steps while planning your finances. While expenses and goals are calculated, things can change in the future. While you might have chosen to work full time while making the plan, now your studies might have taken the front seat, enabling you to only work part-time. Or you might have chosen to invest in stocks, so your plans for travel might be postponed or cancelled.
While such alternative courses of action are common, you need to carefully consider your financial position, life situation, and the possible outcomes of making this change. You also need to think of what you might lose out on if you alter your decisions. Your risk tolerance level also comes into play during such times.
Developing and implementing the financial plan
In this step, you create your financial plan by considering all your expenses, assets, liabilities, and alternative options to create an action plan. You can achieve your short term goals before moving on to the long term ones. You might seek help from insurance or investment services to fulfil this step.
Monitoring and revising the plan
Once the plan is in motion, you might feel the need to implement a different investment strategy, take another insurance, adjust expenses and income, or manage your liabilities differently. So in this final step, you can revise your financial plan by continuously monitoring how the current one is working and what changes you need.
Financial planning is an ongoing process, and you need to regularly assess your economic situation to make a feasible plan. Follow these steps in line to improve your financial stability and seek the help of a certified financial advisor whenever needed.
To know more about finance and investment, get in touch with experts at AGIL.