How to Manage the Personal Financial Planning Process

Managing your personal finances can be a Herculean task. Financial planning mainly depends on your income. When managing your personal finances, keep both your immediate needs and long-term dreams in mind. Financial planning must include emergency deposits from which you can draw at least three months of living costs without any job. Similarly, such funds come in handy in the event of any medical emergency or unplanned for costly incidents in one’s life. Other financial considerations include funding your retirement, paying children’s college fees and financing your dreams.

Financial planning must include saving your money; unless you save what you have, you cannot earn more from it. Enumerate all your sources of income and expenditure. Then enumerate all your expenses and see if you can lower them. Save your income by organizing your life. Only saving your money and accruing it in your savings account may not be sufficient to accomplish all your dreams and monetary requirements; this is where the need for investment develops. After executing all your monthly needs, the enduring amount of money can be used for investments. Before beginning investments, first and foremost eliminate all your loans. You can direct some money to all your loans monthly, but first, pay off the loans with the highest interest rates. After you pay the costliest loan, then divert that amount of money to the second most expensive loan. Stay away from taking any further loans. After paying all your loans, start investing.

You can invest money in various ways such as via the stock market, insurance, real estate and gold. MyMoney.Gov, a website managed by the U.S. Treasury offers tips on how to invest. The stock market is often considered the preferred one. But investing in stock  is risky; this is because you cannot predict its outcome and it is subjected to market risks. While investing, evaluate your requirement of money at various stages of life. Plan both short term as well as long term investments. You must be able to survive without that money for a long time. First secure your emergency deposit and divert 10 percent of your monthly income to it. Your emergency deposit should fund your survival and the survival of your dependents for at least 3-6 months. Never exploit this money for other purposes. It should be solely reserved for emergency situations.

Investing in gold is sometimes a viable option. If gold prices are increasing and it can be changed into money at any given time. You can always buy gold when you get an extra bonus on your income or the money you get as tax returns. While investing in insurance policies, be sure to take up a policy which has minimum premium and maximum benefits. Life insurance, medical insurance and child insurance plans can be of benefit. For long-term investments, real estate is the best option. And it is always good to have your own home when you retire. But make sure you can afford the mortgage loan on your income and pay it off before you retire. It’s always better to start your retirement plan early in your life.

In case your spouse is also earning, then save one income and live off the other. It is always better to have some bank balance. If you have surplus income, then you can also become an angel investor in start-up companies. But first, thoroughly research the firms you are interested in and their management. In other words, don’t suffer losses at the hands of fraudsters. The amount you are investing should be separate from your regular investments. It should not affect your stability, even if losses occur. In case the company fails, you must be able to continue your life normally.

As said earlier, the main element in financial planning is foreseeing your requirements as well as market changes. Always take inflation in to account before charting out a financial plan for your personal finances. But the most important part in managing personal finances is sticking to your plan of action. The main reason for failure of the personal financial planning process is impulse for not following the plan to the hilt. Immediate gratification of your needs does not guarantee a happy and prosperous future for you and your family. So always stick to your plan of action for an anxiety free life.

If you are still unable to manage your personal finances, then you can always acquire the services of a financial adviser. You may also seek advice from people who have successfully managed their finances. Abstain from schemes that promise to reward you very early. They might be scamming ingenuous people, eager to earn more money in lesser time. Managing your finances and developing them is a long-term process and you need to have patience to follow through with it.