Financial planning

This can be defined as an ongoing process to help one make a sensible decision about money so as to help to achieve one’s set of goals.  

 

Financial planning is about developing strategies to help you manage your financial affairs and meet your life goals.  This is a series of goals used by an individual or business to allocate future income to various types of expenses.  It also includes a budget which organizes one’s finances.  Sometimes, it includes a series of steps or specific goals for sending and saving for future income.

It is necessary to note that if you could achieve your financial goals by simply putting money away in the bank, you wouldn’t need a financial plan. Most times, we often decide to manage our financial affairs ourselves or leave it to someone we know, but financial planning is a specialist profession and it is only wise that you get advice from a properly qualified person. A financial planner is most suitable to help you reach your financial goal.

A financial plan can also be an estimation of cash needs and a decision on how to raise the cash, for example, borrowing.

In planning for our future, the level of commitment we give to the budget plays a significant role. So there is need for us to understand the rudiment of personal budget.

What is personal budget?

This is a financial plan that allocates future personal income towards expenses, savings and debt repayment.  Past spending are usually considered when creating a personal budget.

Some basic concepts for personal budgeting are as follows:

1.       Purpose: A budget should have a purpose or a defined goal that can be achieved within a certain time or period. Knowing the source and amount allocated to expenses is very important.

2.     Simplicity: It must be designed in such a way that it is easy to understand and implement.  You should use simple mile stones in your budget so that you will find it encouraging to stick to. 

3.     Flexibility: You should always work with the mindset that your budget can change from month to month and as such, it will require monthly review.

In addition to studying the above, there are times that our incomes are not regular.   This can be very challenging, but all the same there is still need to have a budget.  In drawing a budget for irregular income, there is need to pay attention to the following:

1.      Identification of your annual expenditure

2.     Identification of average  income

3.     Ensuring that spending is done in a relatively constant manner

4.     There is need to ensure that you don’t run out of money

If this is what your income level looks like, then it is necessary for you to keep records of your expenditure (past and present), it will help you in planning. Always view your expenditure holistically. Always ensure before you make any expenditure that you try to determine its effect on your budget.

In conclusion, remember that this is not an academic programme, there is need to take advantage of a professional help. It pays to do so.