Art of Financial planning Part 2: Some Basic preparations

Now that in the previous session we learnt that financial planning involves channelization of your funds towards the fulfillment of your goals, let’s now check out the basic preparations before you get started.

While starting, the first thing that you should know is where you stand. Your understanding of your own strengths and weakness helps you in making decisions for your financial freedom. Soon develop goals and objectives which alone can provide a vision for your financial planning process. Make specific goals to attain your vision easily.

These are the issues you need to primarily look upon; personal details and dependents, health related information, your assets and liabilities, insurance details, existing investments and asset location, tax outflow, planning for major developments expected in the coming year, estate planning etc.

The whole process of financial planning revolves around achieving preset financial goals that are specific, measurable, realistic and attainable, also time bound. Goals can be short term, intermediate or long term. Soon prioritize these goals. Comprehend the difference between your needs and wants. In situations where your surplus is not sufficient, you will have to curb discretionary expenses, that is, expenses you can defer, reduce or eliminate.

Understand the inflow and outflow of money, termed cash flow. The best and the most pragmatic way of tracking spending is through budgeting. A budget helps you ensure that your income and expenses match. Budgeting also makes it easy to figure out the adjustments needed in spending habits. While tracking your assets, exclude the home you reside, as it is not an investment for the future. Locate fixed discretionary and non-discretionary expenses that can help in reduction of the expenditures while at the same time, increasing savings.

While making a budget, jot down the following details. Namely, income, expenses, separate wants and needs, have realistic expectations, get family on board and make a constant review of the budget, periodically.

You may not have definite answers to many questions while laying out your financial road map. As no prediction may be accurate, you will have to make assumptions. Poor assumptions may give poor results.

This was a start up to the making of a personalized financial planner in you. There are lot more nuances to the art of mastering its tactics. Stay in touch with our upcoming sessions that will unroll more of those complicated world of finances most lucidly into your simple world, making it better to live.

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