Personal financial planning is very necessary to lead a smooth and secured life where tensions and monetary problems are far behind. Personal finance planning is becoming more and more relevant because in todays economy, job security, social security, pension etc. are disappearing very fast.
To plan personal finance actually means, applying the finance principles in the life of an individual or a family, to give a planned shape to the present and future life. It is actually a process through which an individual or a family determines their budget, determines how much to save and where to invest, how much to spend, how to use credit cards, how to make good use of available finance options, tax management and obviously determining retirement plans.
Personal Finance planning can be divided under the following heads:
Evaluation: Every person has some assets and income sources and at the same time some liabilities and some responsibilities to carry out. Now to asses somebody, all these income and expenditures should be placed on a balance-sheet and then one can understand how much he can save or invest for his future plans
Aim: For better future planning it is important remember that one has to be free from the worries relating to the basic necessities of life, like house, food, medical facilities, and enough money to live upon. Again there are responsibilities like giving good education to the wards and if possible, financing their careers
Proper planning: It is a necessary part of the process and to use the available resources well one needs to follow a pre-determined policy. This planning includes reducing expenditures and trying to increase the gross income and also to invest the money in the best available medium so that it can grow steadily
Adopting the plan: After preparing the plan one should execute it during the course of life. In this case, some professionals may be consulted because this is actually not an easy job
Monitoring: One should remain conscious about the adopted financial plan, should review the plan from time to time, and if necessary modify it
Last Updated on : 1st August 2013