Nowadays we can see most people are quite inclined towards financial awareness. Managing and investing in their finances have become a priority in most peoples’ lifestyles. Managing your finances or financial planning is about administering your finances to achieve your financial goals in the most optimum manner.

This helps in determining the current financial position, where you want to be, and how to reach there.


Financial Planning Process

 # Assess your financial situation

A good first step when developing your financial plan is to assess your current financial situation. Where do you stand today in terms of finances? An exhaustive list of all the income sources, expenses, total assets in your name and liabilities will give a clear picture of your current financial position.

# Set your financial goals and budget

One of the first pieces of financial advice that most people receive is that they need a budget. A budget will show you how much money you expect to bring in and then compare that to your required expenses. Instead of viewing a budget as a negative, you can view it as a tool for achieving your financial goals.

All life ages require financial planning, it doesn’t matter how much you earn and what is your age. Setting up financial goals and putting it in a time frame will create a road map to achieve it. It will help even low-income earner build up their own assets with a systematic and disciplined approach.

# Know your risk tolerance

Taking risk is an individual preference but when it comes to finances, you must evaluate your risk appetite. Risk is the potential factor that impacts the expected outcome of your investments. Usually, people at a young age have high-risk appetite than people who are about to enter the retirement phase. It is to safeguard the accumulated corpus to be used after retirement.

# Build and manage your investment portfolio

Just saving money from your salary may not be enough to meet your future financial goals. Building an investment portfolio based on your goals, time frame, and risk appetite will shape the path to achieve them. Inflation is an important parameter you should consider while selecting the investment category. You must also have a downside protection by diversifying your assets into various investment category.

# Monitor and adjust your financial plan regularly

Financial planning can help you look at your financial aspects and organise them in most efficient manner. It is not a one-time event but rather an ongoing process. Plan should change over a period according to changes in your personal circumstances. In changing market conditions, an important thing to do is analyze asset allocation, which could have changed and need to be rebalanced.

If one is failing to plan, then they are surely planning to fail. With a financial plan in motion, you will get the peace of mind that your financial goals are not only achievable, but they are on track as well.