Financial planning is a process of setting financial goals in regard to your salary and short term expenses. Your financial goals evolve as you grow in your life.
In this article, we will discuss financial goals and planning in detail. So, keep reading. I bet you will learn something important.
Role of Financial Planning
Poverty is the worst thing because it can deprive people of education, food, shelter and a lot more. I believe that your situation isn’t that bad, you must have enough money to eat and get educated.
Actually, proper financial planning can provide you these necessities in the future too. It will help you live to the fullest till your last breath. So, let’s discuss it in detail.
1. Control Spending
Without financial goals, you spend like a mad. Actually, We humans get a very satisfying feel after spending money. If you want to live happily then it can be problematic to depend on this behavior after a certain extent.
Most of the time, people don’t understand their overspending trends and keep wasting money like idiots. This can lead to even bigger problems like bankruptcy which we are going to discuss next.
Thankfully, when you have an idea that even tomorrow you need to survive then your spending habits are automatically controlled. So, to get a hold of money and happiness in your life, goals are very important.
2. Avoid Bankruptcy
It’s the most important lesson anybody can give you. NEVER GET BANKRUPT. Simple, right! But, it isn’t. Life is so uncertain that it can take the heck out of you anytime.
Suppose your wife is diagnosed with cancer and then you don’t have money for the treatment. I think it’s not wise to get tensed about this uncertainty, rather you should acknowledge it. And, then plan accordingly.
If you have proper financial planning and goals in your life, then it is possible to avoid getting bankrupt after such type of events.
It’s very important to have self – confidence to live happily and more efficiently. If you have proper plans for the future then it automatically provides the confidence to keep moving.
The trick is to focus on goals which you can achieve in reality. And to avoid using fiction or imagination here. Else, after a while, your self-confidence will turn into a nightmare when you won’t see any progress.
My Financial Goals
This will help you in getting an overview of the situation and then head start your planning. I hope you will get an idea of how I think about this topic. Repeating my words, your goals should be achievable.
1. No Debt
Debt can seriously destroy your life. In the modern world, it’s just a matter of few taps on your phone to get a credit card. First, people plan about being financially independent. And then they also keep getting attached to the ropes of debt.
It’s simple, Credit Card advertisements may seem tempting but AVOID THEM at all costs. If you are already in debt, then pull up your socks and get out as soon as possible. Make it your priority and just focus on it.
I have a simple motto in my life. Its always better to live a simpler life and sleep stress-free. Rather than the shiny glamorous life full of indebtedness.
2. Retirement Planning
Most people start thinking about retirement only in their thirties or forties. This is a big mistake because it can create panic and tension in your life. So, include this in your list of financial goals as soon as possible. Start your retirement plan and have a stress free future.
In your life, money can’t provide you all the happiness. But, its scarcity can obviously contribute to your sadness. Because hungry beggars often can’t live fully (Pardon me for being harsh). This is the reason, I am relating financial planning with happiness time and again.
There are many ways to start saving your retirement fund. I prefer Mutual Funds. There are safe and give better returns. Read here.
3. Diversify your income sources
Most of the people are just dependent upon their jobs or some business to fund their expenses. This mistakes of trusting too much on your profession can be problematic if a worth case scenario happens.
I am actively engaged in my online business and stock market to diversify my income sources. You should also start it as soon as possible. It will largely depend upon your situation. Because it’s not easy to find reliable sources of income else you could have already left your day job.
4. Insurance & Emergency Fund
For instance, the worst case scenario can happen anytime. You may lose your job or get diagnosed with a deadly disease or a car can hit your family member. Anything like that.
You should always be ready to cope with these situations. I have accumulated an emergency fund and also regularly pay the insurance premiums. Both of them can come handy on a rainy day.
Step by Step guide to planning your goals
1. Analyze Income Sources
There is the least chance that you can own a giant villa in Dubai with a small income. So, if you set this type of goals and then don’t have enough resources to achieve them. It will demotivate real badly.
Suppose you earn $1000 a month and you need $500 to fund your necessities like food, rent, etc. Now, set your goals accordingly. Don’t fascinate, else it’s not worth it.
2. Create a raw blueprint
As you have already analyzed what you can achieve in reality. So now write on a piece of paper what your goals should be. It’s as simple as that to start the process. We will later carve these goals to reach the final plan.
Actually, 5 to 7 goals are more than enough. If you prepare a long list then it will get hard to do the selection. So, it’s really important to think deeply about what you plan to achieve.
3. Discuss with your family
This is the point where most of your financial goals will be dropped down and a new list will be formed. Ask your family members to prepare their own blueprints. And then share them with each other.
Actually, everybody in your home needs to be involved in this financial planning process. Because, if you plan yourself only, then they will feel left apart. And hence won’t contribute or do efforts for the success of this plan.
So, now take all the ideas together and choose the goals which will contribute to your life the most. Always remember to keep discussing all this with other members of your family.
Divide the list into Short Term and Long term goals. Then mention the steps which you will take to achieve them. Elaborate each goal in around 100 words.
Honestly, if you can’t even write 100 words about your financial goal then it won’t be easy to achieve that in reality. Use your own creativity and do it. Take a look at one of my financial goals below.
5. Start NOW
Yes, this is it. We have planned your goals. Now, you just need to act accordingly. The best way to reach your financial goals is to start saving money right NOW. I can’t honestly elaborate it more.
You can keep procrastinating and waiting until you will have more money but its not gonna work. You need to move your ass and start it today to really reach where you want. I feel its enough for now.
Its never too late to stop learning. You can find a new learning resource here and sky-rocket your financial education.