Begin your financial planning not by investing. That would mean cooking food without knowing how many people you’d be cooking for.
Instead start financial planning by reviewing your overall financial profile. And when reviewing your financial profile, consider matters like:
- Insurance
- Loans
- Liquidity/Cash in hand for emergencies
- Investments
Once you know your position with respect to each of these, you can start to build an investment portfolio.
Wondering why you need financial planning? Here’ why:
- Income:
Financial planning always helps manage your income more efficiently. Tax payments, monthly expenditures, savings – there I always so much to consider when managing your income.
- Cash Flow
Financial planning would encompass monitoring pending pater, managing prudent spending, careful budgeting – thereby automatically managing your cash flows.
- Capital
An increase in cash flow, can lead to an increase in capital, and this in turn will allow you to consider investments to improve your overall financial well-being.
- Family Security
Careful monitoring of the expenses and savings will ensure you have enough on hand when planning for your family’ security. In case of an otherwise situation, you may then use help and further look into prudent spending and start planning for your family’s security.
- Investment
A well-thought of plan will have taken into consideration your personal circumstances, objectives and risk tolerance. And then will help you choose the most apt investment to that are almost tailor-made for you.
- Financial Understanding
Better financial understanding can be achieved when measurable financial goals are set, the effects of decisions understood, and results reviewed. Giving you a whole new approach to your budget and improving control over your financial lifestyle.
- Assets
While assets may always be desirable, they come with liabilities attached. And hence, it becomes extremely essential to determine the real value of an asset. And meanwhile, the knowledge of settling or cancelling the liabilities, comes with the understanding of your finances. The overall process helps build assets that don’t become a burden in the future.
- Savings
No matter how well you’ve may have planned &even managed to execute, sudden financial changes can still throw you off track. It is good to have some investments with high liquidity. These investments can be utilized in times of emergency or for educational purposes.