The planning structure may vary widely from person to person. However, there are a few common factors that everyone needs to consider while planning his/her finances:
Life Management Skills for Finance Planning – Age
The age of the individual is an important factor to be weighed in. For example, an executive in his early twenties may not wish to spend too much on his retirement funds; the dreaded day, after all, is a long way away. On the other hand, a person in the forty-something age bracket can see his retirement looming over the horizon; he would naturally have a stronger desire to save. Unfortunately, the time value of money is forever on an upward curve, and saving nominal amounts at an early age is wiser than saving huge amounts at a later age. Thus, if an investor starts saving at the age of thirty, then at a 10% rate of return on capital, and an annual saving of say $6000, the investor shall have roughly a capital of $ 1.1 million at the age of sixty when he retires. However, if he begins saving at the age of forty, he would be required to make an annual investment of $18000 to have a similar amount at his disposal at the age of sixty. Thus, if he starts saving at a later age, the annual saving burden is thrice the amount that he would need to forego every month if he starts saving ten years earlier. Again, if we assume that at age forty, our investor is in a position to save $15000 annually and not feel the pinch (as against $18000 which he is required to invest), then we find that if he starts saving $6000 per annum at age thirty and thereafter saves $15000 from age forty, at the retirement date he would have a capital of around $1.7 million, half a million more than what he would have if he starts saving at age forty at the rate of $18000 per annum (which would also cause him undue hardship to the extent of $3000 per annum).
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Life Management Skills – The next step after complete personal finance planning is to formulate a working plan on how to execute the financial plan and take action accordingly to make financial goal turn into reality.
Without personal finance planning, any finance related action may be futile as no financial goal. Indeed, taking no action on proper personal finance planning, any finance goals just appear on paper of financial plan.
Life Management Skills – Seeking advises from professional like financial planner or investment advisors, is a good idea for those people, who are lack of financial knowledge. Those professional people are able to help for proper implementation of financial plans.
Last but not lease, the financial plan should be monitored and reviewed from time to time for re-evaluation. We may adjust our personal financial plan according to our financial condition at different stage for better lifestyle.
We invest to safeguard ourselves for a rainy day. If you’ve just started investing or want to start, then you could use this 7-step plan to become your own investment consultant!
Managing your investments becomes easy when you make it a habit to save, even if it’s very little money. You need to keep a meticulous account of personal income versus expenditure on a monthly basis before you start investing. Here are some steps you can follow:
A budget helps you identify problem spending areas and also helps regulate your cash flow. Tracking your expenses against the budget helps you control spending and free up cash to clear existing debt and save for retirement or your child’s education. For example, your budget allocation includes a certain amount for groceries for a week. You discover on comparing that amount against actual expenses that you have overspent on buying additional items that you did not really need. This will caution you against making similar expenditure next week and at the end of the month, you will end up saving money!
Life Management Skills – Pay off your existing credit card debts
Are you surprised that paying off credit card debt is a step towards investments? Credit cards charge a high amount of interest along with the principal repayments. When you clear this amount, you‘ll be glad to realize that all the interest amounts and late fees you paid to credit cards can be utilized for your savings and investment program.
Life Management Skills – Save effectively for a rainy day
Emergencies often arrive unannounced. Ensure that some money is set aside to cover monthly expenses for at least three months. These funds should be invested or set aside in instruments that can be readily accessed should you need cash. For example, keep these funds in a savings account in a bank or invest in a money-market mutual fund.
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By having overview of our current financial situation after having done a proper financial assessment, we can move forward to set up our financial goals both of short term and long term.
As life management, short term goal normally includes contingency fund, having a desire car, marital fund or study fund which we wish to achieve a short period, either 3 years or within 5 years.
On the other hand, education fund for our children, retirement fund are long term goal setting which target to have it after 10 years, 20 years or even 30 years from the moment we done goal setting.
Life management skill, Goal Setting, is varying widely from person to person as every person having different desire in their life. Anyhow, age is an important factor to effect people while doing goal setting.
For a person who in early twenties, just graduated and having a first job, he may wish to have bigger portion of income to keep for his desired car; whereby a person who nearly fifty would naturally have a stronger desire to keep major portion of income for retirement fund.
Life management skill, Goal Setting for Finance, is part of our life direction. Without proper goal setting, we cannot proceed to do personal finance planning and consequently we cannot have well control of our finance for our secure life in future.
Assessment financial situation is the very first steps we shall do before we start personal finance planning. This life management skill is very important as it will give us an overview of our current financial situation to help in personal finance planning for our financial goals.
Life Management Skill for personal finance – financial assessment by formulating balance sheets and income statement, then figure out the estimated current net worth:
Net worth value = Total Assets – Total liabilities
Cash in hand, fixed deposit account, vehicles, house, furniture, jeweler etc are under assets. The asset data also contains information of date acquired, current fair market value of the checking account like car or properties, retirement assets like EPF, all investments like stock as well as cash value of life insurance.
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Financial management skill is one of the most important in life management skills. This skill effects our financial decision and consequently affects almost every area of our life.
Personal finance is a huge topic regarding all the financial aspects of an individuals or families financial situation and financial decision making. This financial management skill can be complicated if we didn’t spend our time to arm ourselves with the finance knowledge we need.
Personal finance planning is not only planning how much bill or loan able to pay with income from working or investment. When mentioned about personal finance planning, it normally refer to a process of handling personal financial situation: look at intake and output, figure out how to save and spend, planning for our future or desired dream.
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