Saturday, 7 August 2010

Plan Your Finance In The Right Time

What is Financial Planning? Time and Tide will not wait for anybody else. Financial Planning is the process of meeting your expenditures including long term and short term with your limited resources. Yes limited, because human needs are unlimited, but resources (income) are limited. We have to meet our unlimited needs with our limited resources. So we should plan our finance and financial goals. Financial goals such as buying a house, higher education of our children, own a car, meeting day to day expenses, retirement plan etc., These goals can be classified as long term and short term needs and we can choose according to the preference of such needs. Some of them are unavoidable and some can postponed to another time.

Steps of Financial Planning. First you should know where you are. What is your current financial position? Analyze your earnings and expenses. Find how much you can save for future.
This may be your monthly income minus monthly expenditures. What are your present Assets including investments and properties. Financial planning includes all above and some thing more. Let us see the steps for financial planning.

1. Identify your goals.

This is what I have stated at the beginning of the post. You have to identify what goals you have to reach in the near future and in your whole life. It may be acquiring an asset such as house or estate, higher education of your children, Marriage of self and children etc. What ever may be the goals, determine it exactly and find out the financial implications of such needs.

2. Understand your current situation.

After identifying your needs or when you identify the needs you have to know where you are. You must be aware of your limitations and also know that what you have. Your income sources and the amount of money you can accumulate etc. If you are working you must take in to consideration of your stability of work, promotion possibilities and your retirement etc. Consider other extra income you can earn such as income from house property or income from agricultural products etc. If your spouse is working, take consideration of it also. Totally find out all your sources of income and immediate needs such as for food, clothing, medical etc.

3. Develop a plan as per your goals and risk bearing capacity.

This is the next step. You have to find out how you can reach these goals. What type of investments you have to do for satisfying your needs? This may be with high risk investments or low risk investments. High risk investments are investments in stocks, unit linked insurance plans etc., and low risk investments are investments in Bank deposits and government securities. You should choose your investment plans according to the risk bearing capacity and according to your needs. If you are not able to find such schemes get advice from some professionals. When you consider an investment plan consider your age and time or retirement etc. Keep in mind that never put all your eggs in one nest. Diversify the investment instruments. If one fails the other will win.

Implement and monitor your financial plan time to time

This is one of the important steps in financial planning. Never leave your investments unattended. You should check it regularly and analyze all your investments time to time. You must know which one is beneficial and which one is failure. Stop the failure ones and do wisely. If you go systematically you can attain all you financial goals with your income.

I have just given out some guidelines and the situations are varying person to person and time to time. Act wisely for a beautiful financial future.

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