To some people, earning money is not a problem for them but how they will spend the money is their major problem. You will be surprised how someone will just burn their entire net-worth at a sitting on things that are not even worthwhile. This is why one needs to be able to plan their financial life so that they will avoid a lot of financial challenges. The truth is that you are responsible for your spendings, so you should spend with adequate planning. With proper planning, there are things that you will favour over the others and then you will know how to spend wisely. Here, we shall take a look at what is in involved in financial planning.
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The first thing involved in financial planning is to have clear and understandable goals. By goals, I means the financial target that you want to meet and what you want to achieve. These can include short-term, long-term, and mid-term. If you do not have a goal of what to achieve financially, you will not know what to guide your financial expenditures. In fact, within having a goal, everything may look futile and you may spend on what you do not even need and focus on just your mere wants. This is why you have to consciously make financial goals and make them to be clear and easy to understand and follow.
The next thing involved in financial planning is to access your current and present financial status. If you do not tell yourself the truth about where you are at the moment in terms of finances, you may not know what to do and where to go. If you see someone spending in certain ways and you know that your current financial capacity cannot carry it, then you do not have to join them. However, you need to first know what you can do and what you cannot. That you cannot afford a certain lifestyle at the present does not mean that when things improve that you will not afford it.
You have to understand that there is a relationship between financial planning, what you can afford, and budgeting. What budgeting helps you to achieve is that it makes you to effectively outline your income and expenditure. If your monthly expenditure is more than your income, then you are already running your life at a lost. This is a side effect of not budgeting. But with budgeting, you will know your income and what it can support in terms of expenditure. Remember that you are the one that knows your financial worth, so do not allow anyone to pressure you into spending beyond your limit.
In your act of financial planning, you have to prioritize saving and investment. If you cannot save from what you earn at the moment, even if you start earning better, you may not even be able to save. This is because saving is not a function of what you earn or the economy but it is a lifestyle. For every income you earn, you need to set aside some percentages, no matter how small, to save. What matters is not the size of what you save at once but the consistency over time. You may not know that what you save today may become your ever-present and trusted source of help tomorrow.
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In addition to saving, also make investment your watchword. From what you earn and have saved, you can start up investing even if it is little. In this era, there are many platforms that one can invest in even online. However, you need to undertake adequate research and then make your analysis and feasibility studies before you invest. There are some investments that you can start up as side hustles which may become your major hustle with time and may even become your biggest source of income in the future.
The last thing to note about financial planning that will help you is to note that it should be dynamic and not static. From time to time, you need to review, update and adjust your plan to fit into the current trend and your present financial state. As things evolve and change, so also should your financial planning evolve. Trust me, what was obtainable last year may not be the same this year, so know when to adjust your plan and your budget.
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