Personal Financial Planning

Personal finance planning is certainly something very important. It is common for people to ask the question “What is financial planning”. A simple answer to this question is that you are trying to plan for your financial status so that you can build your wealth. It can be a serious problem if you cannot sustain your current life standard after you retire.

At this point, you will certainly be able to understand that you do not only consider your current financial status. You will have to ensure that you will not be in debt now. Yet, you will also have to make sure that this will not happen in future. You need to plan for your future when you have to ability to make money. Otherwise there can be a lot of problems after your retirement.

As a matter of fact, it is not difficult for you to do your own personal financial planning work. A few changes in your spending and saving habits will help. And here are some tips for you.

Current Personal Fiance Status Reviews

Personal Financial Planning - Saving And SpendingIf you have read some personal financial planning magazine before, you should probably know that there are a few steps you should take. The first step you have to take is to review your current financial status. There are a few measures you have to take in order to do a good review.

Personal Balance Sheet

You need a balance sheet in order to review your current status of personal fiance. The main idea behind creating this sheet is to understand your assets and liabilities. First of all, you will need to think about your assets. It mainly consists of three parts. The first part is all your cash and money in your bank account. This is your liquid assets. There are also some assets other than your cash. They will be the second and third part. They are your investments such as bonds and stocks, as well as other assets such as your car and house.

The other part of your balance sheet is your liabilities. Knowing about your liabilities is another important part of your personal fiance planning. You may think that it is not difficult to understand this part. Yet, there is something tricky here. There can be items which are at the same time your assets and liabilities. Your home can be an example here. If you still have to pay the mortgage each month, it will be your liabilities. However, the part of the mortgage you have paid is your assets.

After you have a full understanding of your assets and liabilities, you will know the net worth. The difference between your assets and liabilities will be your current net worth.

Current Cash Flow And Personal Financial Planning

Understanding your current cash flow is another part you need to consider in order to review your financial status. In this case, you will mainly consider your steady income and expenses.

To most people, the only source of income is the salary. Yet, you need to consider your own situation so that you can know all the sources of incomes. You should also take a look at the interest you get from your bank account. You may also can get some dividends from your stock investment. The rental you get every month is also your income if you are currently leasing an apartment.

The next part of your cash flow statement is your expenses. You need to know about all your expenditures. They can be your mortgage, taxes, loan payment. Of course the utility bills, entertainment expenses, as well as all your personal purchases should also be considered.

Now, you should understand your own personal financial status. The next step will be trying to set your personal budget.

Personal Financial Planning – Your Budget

Money And Personal Finance Planning
Setting a personal budget is always important if you want to do your personal financial planning well.

It is a must for you to have a personal budget. It is not hard to set your own monthly budget. You should now understand all your monthly income and expenses with the personal fiance planning reviews. This will be the base of setting your budget.

As mentioned, you can know your net worth. This will let you know if you have more assets or liabilities. At the same time, you will also know if you have a monthly deficit or surpluses.

At this stage, you will mainly consider your monthly cash flow. No matter you are having a monthly surpluses or deficit, you will need to consider your budget very carefully. It will be a good idea for you to first of all categorize your expenses.

Categories of Your Monthly Expenses

There are mainly two types of expenses. There are some money you have to spend every month. For instance, you need to pay your bills, food and clothing every month. This is something you must spend your money on. Of course you will also need to spend some money on your mortgage and insurance premiums. If you need to repay your loans every month, you will also consider it expenses that you cannot avoid.

The other part of your expenses is something that you can avoid. They are usually some luxurious expenses. This can include some of your entertainment expenditures. You should try your best to avoid them if you have a monthly deficit.

Categories of Your Monthly Income

Your monthly income is quite similar to your expenses. There are some incomes you will get every month. This is your steady income. They are usually your salary and interest from your time or saving deposit. There can be some income that may only happen once. For instance, the profit from your stock investment may not be something steady.

Your aim is to make sure that you will at least have a balanced budget. Of course it will be better if you can have a budget surplus. Try to reduce your expenses and increase your income if there is a monthly budget deficit currently.

More Tips Of Personal Finance Planning

1. Save money every month

You should try to save some money each month. This is extremely important in terms of your personal finance planning process. If it is possible, it will be a good idea for you to allocate 10% of your income as saving. You should put the money to your bank account once your get your salary every month.

2. Get out of the debts

If you are currently in debt, you should try to settle all of them as soon as possible. Getting out of debt is an important part for your personal financial planning. To this end, you will need to allocate a certainly amount of money to repay when you are setting your monthly budget. You need to have the discipline to do so. Otherwise you will not be able to settle the debts.

3. Avoid borrowing money

Do not try to get any loan if it is possible. It is true that we may need to get a loan when we want to buy a house. Apart from the mortgage, you should try to avoid any personal loans. There is no point for you to pay the interest unless you really need to get a loan in some urgent situations.

4. Consider some investment

Of course you need to save some money every month. You should also try to put some money on investment every month. This will help you to build your wealth gradually. Yet, you should not go for investment plans which are too risky. You should aim at long term wealth building. This personal finance planning tip will certainly help you to keep your life standard after retirement.

5. Use Finance Planning Software

You can also use software to help you to do the job. In fact, you can do the job a lot easier if you can use the computer to help you. It can be easy for you to use some spread sheet. Yet, it can be even simpler if you can use personal financial planning software. It will help you to track all your income and expenses. It can also help you to track your status of repaying your debts. Such software is certainly a time saver that can help you.

Videos About Personal Financial Planning

There are a lot of ways to find out more ideas about the ways to plan for your future. There are a lot of websites and books you can read to this end. In fact, it is also possible for you to find out more ab out it from some online videos. Here are some Personal Financial Planning Videos you can view so that you can know more about this subject.

Now, you will probably understand how to have a personal finance planning so that you can plan for your future. Be sure you will view the above videos so that you can do it easily. Here is one more video on this subject. You can discover even more from this video.