Guide to Personal Financial Planning

With the mounting expenditure, it is very important that you devise a plan for your cash outflow versus inflow. This is the most important factor when preserving your savings and improving your chances of a financially stable future. Devising an efficient plan such that the cash outflow never exceeds the inflow and acting accordingly is personal financial planning and management.

Ingredients of Personal Financial Planning

The constituents of personal financial planning includes

• Devising a budget
• Planning out for savings
• Investment plans
• Insurance programs
• Taking care of costly but essential purchases
• Managing cash inflow versus cash outflow

Blueprint of Personal Financial Planning and Management

The blueprint for personal financial planning and management would have a budget at the top. If you decide to pursue personal financial planning to combat your monthly expenses and thereby increase the percentage of savings, you will have to start with a budget.

Budget has to describe the details of the expected expenditure and the versatile ways through which you will be spending your monthly income. It should also tell you as to how much you can save at the end of every month. Without a budget, personal financial planning would never succeed resulting in haphazard financial management.

Once the budget is up, now you would be very clear as to how much you can save every month. Its high time that you plan for your savings and investment. Savings is the portion of the amount you are planning to save and would be available to you instantly when a need arises. The amount that you plan to invest generally would take any form and as a result may not be available immediately as and when you need money.

When you design your personal financial plan, allocate at least 10% of your monthly income for savings. At the end of 6 months or 1 year, you can take a part of your savings and invest the same in some productive means. If you are an aggressive investor with a high risk profile, you can expect to get remarkable returns or may end up in even loosing the capital sum by investing in shares and mutual funds. If you are a risk-averse investor, try investing in fixed deposits in nationalized/scheduled banks.

Insurance program is one of the crucial factors in the design of your personal financial planning and management. Insurance policies enable your near and dear in case of unexpected eventualities that might happen in future. Investing in insurance is definitely an investment with nominal returns even if nothing bad/serious happens at the end of the insurance period.

Having insurance as a part of personal financial planning not only enables the family to meet out the expenses in case of contingencies but also induces mental peace because of the availability of finance in case of unfortunate and unexpected incidences in life.

Costly but essential expenditure include the purchase of land, house or a car. Buying an immovable asset is quite costly but highly essential. Meeting out such expenses require unique personal financial planning skills. A loan or a mortgage can help you our in the deal but beware that you will be forced to repay the debts by means of monthly installments for the next 10-15 years. Your personal financial planning skill has to be very sharp here to meet out the monthly repayments during the tenure of the loan.

Let your personal financial planning have the principle of not buying anything on credit. Credit card companies make false promises and convince you that extra charges are never incurred for buying on credit but that is never true and practical. say a straightforward ‘no’ to get something which you cannot afford. But, remember taking a loan to get a house/land is definitely a good move in personal financial planning due to the fact that the interest paid to the bank against the loan that you have taken is just a small percentage of the high returns that the asset would yield in a decade or so.

The aim of personal financial planning is to assist you and your family at times of financial crisis and induce you to save at times of surplus cash inflow. Devising an efficient personal financial plan and managing your finance accordingly will not only give you mental peace but also helps you in meeting out unexpected expenses throughout your life!

Related posts:

1. Financial Planning Basics and Information on Colleges for Financial Planning
2. Tips on Saving, The Crucial Aspect of Financial Planning
3. How important is Financial Analysis and Planning?
4. The Intricacies of Financial Planning

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