Having a clear financial plan is core for taking control of your finances. Ironically though, not many people pay close attention to this. Not even people who seemingly are on top of their game as far as their spending and investing choices are concerned, get around to documenting a proper financial plan. Hence, it’s not surprising they fall off the wagon quite easily.
The precursor to personal financial management is a well-structured financial plan.
A financial plan helps you outline where you want be with your money, what you need to do, when you need to do them and how you need to do them. It provides an overall framework for directing the flow of resources which encompasses all the different goals you might have from time to time. Thus, creating a path and timeline for you to follow towards achieving your goals.
It also helps to prepare for big life events – birth of a child, purchase of a family home or children’s college education. These require more than just saving; they require a detailed financial plan that consists of the following – sorting out debt, planning and tracking expenses, setting financial goals, building an investment portfolio, arranging insurance and the constantly reviewing the plan.
The financial plan is clearly personal and would vary from one individual to another. They also need to reflect changes that might occur in the various stages of life.