Introduction;
A financial plan is a statement estimating the amount of capital requirements, and goals, and determining its composition. Goals can consist of or include higher education for children, buying a new house, business setup or plant, retirement planning, etc. Financial planning provides direction and meaning to financial decisions. It helps to evaluate the impact of financial decisions on other areas – Article of a Financial Plan.
Whether you’re a do-it-yourself investor or money neophyte, you need financial planning. It emphasizes the following aspects – how to make a financial plan? How its net worth is calculated? Do we need a financial planner for it? It defines all the resources, activities, and materials which are required to achieve the goal.
How to make a financial plan:
Most people never take the time to identify their proper financial goals. They either just don’t get sufficiently organized, or else they just feel safe “winging it” and making financial decisions as each new situation arises.
- Gather important information
- Establish goals and objectives
- Evaluate the current situation
- Develop a comprehensive plan
- Implement Plan
- Periodic ongoing review
Creating a financial plan:
- Write down your financial goals
- Start an emergency fund
- Pay off debt
- Create a plan to invest
- Get the right insurance
- Create a plan for retirement
- Plan for taxes
- Create an estate plan.
- Review your plan frequently
- Stay the course
Why do Financial Plan:
As financial planning is important in our life, there are some reasons to do the planning. Firstly, it forces one to define your goals and priorities and make quantitative and qualitative decisions about your money. It requires you to look carefully at where your money is eventually landing. It also requires you to look carefully at where your own money goes and begin to direct it in a meaningful fashion, instead of wondering where it disappears.
The Purpose of Financial Plan;
Basically, a financial plan is nothing but designed to plan/help you to make the best use of your money and achieve long-term financial goals, whether they are buying a bigger home, sending your children to college, enjoying a comfortable retirement, or leaving a legacy.
-To prepare a map for clients to follow their rules in accomplishing their financial objective.
-To derive various solutions towards the accomplishment of significant goals and the satisfactory resolution of client issues.
Do we need a financial planner?
Even computer programs and other interactive media are subject to constraints as they provide advice and data too. Hence, for this particular reason, you may end up choosing to consult a financial planner at some point in time personalized counsel on one or more aspects.
So exactly when should you seek help from a financial planner? One factor is your level of income. Like basically if you’re making $50,000 a year probably under most of the circumstances you won’t need a financial planner. You may well benefit from a professional financial planner by earning $50,000 a year and now end up finding yourself on the verge of bankruptcy.
Calculating net worth
List your Assets: Financial planning is an important tool so calculating your net worth may not be as simple as it generally looks. A number of possessions, investments, bank accounts, and other things with fiscal value, these things we accumulate over a period of time.
In order to list all your assets, which you have stashed in different locations you have to take a hard look at what you actually own. Also include retirement accounts, such as 401(k) earnings, and IRAs, bonds, stocks, or other holdings you might have.
Identify your liabilities:
The entire balance of the debt should be listed as a liability so, some debts as such as personal loans and as well as student loans, will be money that you owe outright. Now you can eventually check your last statement just to have a glance at how much debt you have been left with, and then just use that balance in your net worth calculation.
A car loan or mortgage will be tied to the asset as other debts. Determine a Car loan for your net worth calculation or the balance you have yet to pay on the home loan. For example, subtract the outstanding balance on the mortgage as you would take the assessed value of the property. The value with the differences is the part of your net worth.
