Steps To Plan Your Personal Finance


In order for personal finance to pay its duly pay its dues over the long run, it needs to be invested in a proper manner and needs to be managed with timely care and scientific evaluation. Planning is needed in order to actively work towards the goal that has to be met. Thankfully, various groups of mathematicians, along with the financial planners have deduced various plans pertaining to effective personal finance planning. One of the many plans has been elaborated in the following steps:

Evaluation: The income of the investor has to be evaluated and the extent to which the investment can be made formulated. This can be done with the help of the income statements and the average expenditure incurred. The calculations are done keeping the following in mind:

Assets: These are the items that have a monetary value attached to them and are owned by the person planning to invest. The assets can include the tangible and the intangible assets like the stock market shares, bank balance, insurances, residential or commercial buildings etc.

Income: This includes the income of the household. In case multiple family members are employed, the cumulative sum of all their incomes is taken into consideration. The mode of employment has no affect as the planning requires presence of income and not its source.

Liabilities: All payments that need to be borne by the household are maintained under this category. It takes into account all the areas wherein the investors have to pay. This takes into account all the loans and other credits that the owner is liable to reimburse.

Interests: The interests that the investor needs to be fulfilled in both the long and the short terms are calibrated. This helps in the planning phase as the plan is made keeping both the goals in mind. Failure to meet them would result in ineffective planning.

Formulation of a plan: Once a careful evaluation of the necessary items has been done, the next step is to formulate a plan to put the money into good use. This is generally done keeping in mind the future changes that might affect the owner like the rise in income or expenditure.

Implementation: Implementation cannot be done by the investor without the know how of the ways through which it can be effectively done. This prompts them to hire the services of the various advisory organizations working full time to provide services. After a due consultation, the implementation is carried forward.

Management: Nothing works without proper after implementation management and the same is demanded by the plans associated with personal finances. Constant checks have to be done and the status of the plan monitored. Any problems arising need to be rectified and hence bringing the plan back on track.

These steps are a vital part of all planning methods and are included in some way or the other even if it is by using a different name for it. Avoiding any of them would lead to incomplete planning and hence ineffective implementation.

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