Personal financial plan: what is it and why is it needed?

2.10.2022
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персональный финансовый план

Not everyone can manage their money, save money, and manage it correctly, but literally everyone can learn how to do it. And an individual financial plan can help in this direction-it is a list of achieving the material desires of a particular person in the future and a description of how exactly he will implement them. You can create a program of monetary actions for a month, a year, or several years, depending on your specific goals. In fact, such a document can be called a scenario that describes material problems and methods for solving them. This pattern of actions is very similar to business planning, which is formed for creating and developing a business. The main difference from it is the distribution of the personal or family budget.

In simple terms, this is a list of a person’s income (salary, interest on deposits, inheritance, other income) and what they plan to spend it on. This includes both fixed expenses for food, travel, and family maintenance, as well as more significant goals, such as an expensive vacation, buying a new home, or buying a car. Such a list disciplines a person and helps them avoid unnecessary and unplanned purchases. Before you make a personal financial plan, you need to understand that this program of actions is not aimed at constantly saving, but so that you can optimize your costs as much as possible and get more for the same money.

Who needs a personal financial plan

financial plan

In fact, the scheme of managing funds is required for everyone who wants to assess their financial situation, manage it and improve it in the future. After all, it can be considered as a road map showing when to spend, how to increase profits and invest. It is important not only to make a personal financial plan, but also to adhere to the chosen path to achieve your goals. Planning is the key to staying away from impulsive purchases, showing reality in numbers and helping you increase your capital. But there are those who simply need the procedure for disposing of funds.

Among them:

  • Entrepreneurs.The ability to manage your own personal funds directly affects business activities.
  • Debtors.For this category of people, it is extremely important to have a program for earning and spending money to pay off debts.
  • Spendthrifters.They are usually quite impulsive people who don’t even notice when they are wasting money.For them, a financial plan is a great opportunity to learn how to control and limit their spending.

Advantages of creating a personal financial plan

personal financial plan

  1. Objective assessment of the financial condition.The project will make it clear in terms of earnings/expenses, as well as how much you can earn/spend and how much money you will need in the future.Thanks to a well-founded program for completing the submitted tasks, there is an awareness of which goals are real and will materialize in the future, and which will be unrealized.
  2. Specifying your wishes.When setting goals, it is advisable to calculate the cost of all points, the time frame for achieving them, and the frequency of deductions for their implementation.
  3. Setting priorities.Ranking priorities helps make decisions about what is really necessary for a person, and what can be postponed for the future, or what can be abandoned altogether.
  4. Great motivation.Planning and goal setting are good motivations for improving financially.
  5. Assessment of real opportunities.Thanks to planning of expenses and receipts, you can make sure that the goals are achievable or, on the contrary, unattainable, and objectively assess the real state of affairs.In addition, this tactic will help you understand which direction to move in order to effectively implement tasks in the optimal time frame.
  6. Development of tactical options.Creating a detailed program of actions will help you decide in which order to prioritize, pay attention to one item or several at once, and maintain a balance between everyday costs and the implementation of long-term tasks.
  7. A chance to eliminate wrong decisions, ill-considered expenses and investments.Systematizing this data will help you assess how daily money issues and their decisions affect profitability.
  8. The ability to choose appropriate methods of saving and increasing funds.
  9. A specific scheme for reducing liabilities and increasing capital.The approach to the set goals can be consistently tracked.
  10. Lack of chaos in money matters.Such a program helps to eliminate chaos in finances, helps to easily abandon spontaneous impulses and thoughts that often cease to be relevant after a while.

Financial plan: how to create it?

how to make a financial plan

Many of our fellow citizens live from paycheck to paycheck, often do not know how to properly plan and spend their fin.tools. In our rapidly changing and fickle modern world, long-term and even medium-term planning is really rare for many people. And all because people just don’t know how to make a personal financial plan and how to implement it. After all, in this work, it is important not only to have a well-designed program of actions, but also its systematic implementation. And it is disciplined adherence to a given course that can be the most difficult test. In any case, it is extremely important to invest within the specified time frame for each item of expenditure.

There are a lot of options for how to make a financial plan, but traditionally all experts adhere to the following stages::

  • Setting up tasks.A clear definition of what the program is written for helps both in its planning and in its implementation.
  • Deadlines.Depending on the significance, you must set a time frame for all items.
  • Revenue optimization.At this stage, all possible sources of income are identified.
  • Cost optimization.A clear separation of necessity and immediate desires is another step on the road to economic literacy and achieving intentional goals.
  • Following the chosen course.Strict compliance with the set benchmarks and their limits will help you achieve maximum efficiency.

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