Personal financial planning and management is related to the way you use the financial principles to your benefit as an individual or as a family. The knowledge of the process involved in the process is very important because of the importance of finance to your everyday well-being.
You usually take time to plan for other things but not for your finances. This is dangerous because it will be difficult to know your true position and have a clear guide and direction without a plan. You may be living in an assumption of what you have if you do not take actual stock of where you are and where you want to be.
Most people have issues with their personal finances, and they have never come to a point where they have full control over their personal finances. They think that the management of personal finances will only be possible when they start making millions of dollars every month. However, this is not true. This assumption usually makes people reluctant to take control of their money habits and they end up in a financial crisis.
Others think that taking steps to manage personal finances is harsh and exaggerated, and they just live each day as it comes. Others live with the dream of becoming financially free one day and they, therefore, see no need to bother planning for the few peanuts they presently have. This is a very wrong perception, and it is important that you take charge of your personal finances.
Tips for Personal Cost Control and Management
One simple tip is to make good use of free samples. Why should you buy something when you can get a smaller version of it for free? It sounds funny, but it helps. Also, be a good steward of your plastic money.
If you are very extravagant, then avoid having a credit card; go for a debit one. Open a savings account instead of a current account, because your rate of withdrawal will be regulated. Make an effort to save money and reward yourself when your aims are met. It also makes more sense to buy things in bulk. Do a month’s shopping instead of buying what you need every day.
This is especially with dry foods and foods that have a long shelve life. Things are much cheaper when they are bought in bulk, and you will find more offers on bulk items than on single ones. It is also cheaper to transport many items at once than to go ton the store every day or every week. Remember, saving money is not only in the price at which you buy them but also in the effort, time, and money you spend to get them to your house.
When going to the convenience store, always have a list and stick to it. This is to avoid impulse buying because this is what affects many people’s personal finances. Have someone who will keep you accountable, say a spouse, or a friend. Practice sticking to the shopping list and it will become natural to you with time. Mark your progress, and give yourself incentives and rewards for every progress you make.
Steps in Personal Financial Planning
The steps involved in personal financial planning follow laid down principles that can be tailored to suit individual needs. These principles are applied to the monetary decisions that are going to be made. Personal finance is used to look at the way a family or an individual will earn an income, budget it, save, and invest.
This is normally done over a certain period. The principles used will have a direct impact on the level of management of personal finance.
Personal Financial planning involves the following steps.
Assessment is done by checking out one’s personal income and expenditures. If you are looking to assess your financial situation, you should have records of your income and expenditure. Your personal balance sheet will help you see the clear picture of where you are with your finances.
This way, you will be able to know where you are spending too much of your income if you happen to be in a financial crisis. In the event that you are managing your finances well, the balance sheet can be used to show you how you can improve your finances or how you can re-invest to get a better income.
Set Financial Goals
After the assessment, setting goals will act as your guideline for a better financial situation. This should be done whether you are financially stable or you are suffering high financial instability. You can have short term goals and long term goals. The goals should be realistic to avoid being over-optimistic. When you set your financial goals, you will have a direction towards financial planning. These goals will also remind you how to use your income well. Once you have set goals, you need to create a plan and how to execute the plan.
Create a Good Financial Plan
You need to create a plan in the form of a budget to get to your goals and execution of the same. The financial plan should be simple and it should not be too optimistic. Make plans according to what you are sure that can be achieved instead of what you want to achieve. You can make plans to invest in other areas like the stock market or increase your remuneration at work. The plan has to be executed once it has been made. Execution is the hardest part as it will require a lot of sacrifice and commitment.
Monitor your Plan and Evaluate your Performance.
You have to constantly monitor your financial plan and evaluate the actual activity against the plan you have made and how it is being executed. This monitoring action will help you to remain on course and become a guide during the next period planning.
If all these tips and steps are applied, one is sure to have good personal finance management and this will surely lead to rapid growth and financial stability.
I hope you have gained a little insight from this article, please leave your contributions and comment below.