Making personal financial planning is very important. Not only are we able to know the priority scale of money spent every day, we can also avoid financial deficits, or as the proverb says, "A peg is bigger than a pillar ."
Understanding Personal Financial Planning
Personal financial planning is the process of managing individual income and expenses to achieve personal economic satisfaction. This planning is very important in order to be able to map personal financial conditions, allocate funds in a structured manner, and provide motivation to collect more money in accordance with your financial goals.
According to the Certified Financial Planning Standards Board Indonesia , financial planning is a person's life goal through planned financial management. If successfully prepared comprehensively, the plan can become a blueprint for you to realize according to priorities.
Apart from that, good financial allocation planning can be used to realize life goals such as buying a house, going to school, having a private vehicle, preparing for retirement, getting married, and so on.
Personal Financial Planning Goals
Financial management planning objectives can differ between individuals. But the point is, through good financial planning, a person has a greater opportunity to achieve various dreams, such as studying abroad, going on holiday, studying investment , and getting married and having children. Following is the complete review.
- Protecting Assets
The first goal of income planning is to protect assets while dividing income for daily needs, for example to pay electricity, installments, investments, and so on. Apart from that, planning your income and expenses will also make it easier for you to save and add investment instruments, for example gold or bonds.
- Make money
If you are already working, the salary you earn can be used as business capital. Of course, the allocation of these funds must be planned as well as possible so that it does not go over budget or is not optimal. Save the income you earn for your daily needs. To make more money, you can also invest it in various types of investment instruments.
- Making Investments
Apart from protecting assets and making money, personal financial planning must be managed well so that it doesn't just run out. One way that can be done is by investing. There are many investment instruments to choose from, ranging from gold, property, deposits, mutual funds, to shares.
- Avoiding Anxiety
If your financial planning is prepared well, then you don't need to worry about future needs. The reason is, by having a mature and neat financial allocation plan, you can enjoy life in the future without lacking money. Emergency funds are available, investments are smooth, there is no reason to worry.
- Achieving Long Term Goals
Many people have long-term goals in life, for example buying a house, a motor vehicle, paying for their children's education, and going on the Hajj. This goal can only be achieved if you are willing to make careful financial planning from now on. You also have to regularly save according to plan so that this goal is achieved.
How to Make a Financial Plan
In general, there are several stages that you must take to create effective personal financial planning. This process can also apply in the long term, you know! For more complete information, please check the practical steps below.
- Record All Personal Income and Expenditures
The first step you can take to make a financial plan is to record all personal income and expenses. It would be better if you also include the sources of income and expenses as material for future evaluation.
- Create an Expenditure Budget
After recording income and expenses, the next step you can take is to create an expense budget. The method is very easy, namely total income minus total expenses in one month.
- Pay Debts & Installments on Time
Allocate the income you receive in one month to pay debts and installments. If it is not resolved immediately, debt and installments will become a problem that will cause your financial burden to increase continuously.
- Press Consumptive Spending
Observe financial records for the past month. From there, you can determine which expenses can be minimized for the next month. This way, you can save more and set aside existing funds for other things, for example investment.
- Allocate for Emergency Funds
An emergency fund is a budget prepared for undesirable conditions, for example when you are hit by a layoff or have an accident. Ideally, these funds amount to 3-4 times your monthly salary and must be set aside at least 5-10 percent of your salary each month.
- Separate Savings and Investment Funds
The next way to make financial planning is to separate savings and investment funds. This must be done to prevent you from losses or the urge to overspend on investments.
In addition, savings are more liquid than investments, so you can cash them out or divide them quickly at any time. If you don't plan to buy consumer goods, Bizhare suggests diverting your income into investments.
- Have Health and Life Insurance
The next step that must be taken is to set aside funds for health and life insurance. By registering for insurance, you and your family will be guaranteed maximum protection. You don't need to worry about unexpected events.
- Conduct Expenditure Audits Periodically
After completing financial planning and applying it to your daily needs, you must conduct expenditure audits regularly, at least once a month. This way, your financial and living conditions will be better in the long run.
Benefits of Personal Financial Planning
Financial planning can make it easier for you to manage cash flow now and in the future. In fact, someone with a good financial strategy is more adaptable and able to consider every decision regarding their life goals.
- Make yourself more organized and disciplined
The first benefit of financial planning is that you can be more organized and disciplined in managing money coming in and out. Apart from that, a thorough planning list can also help you create a priority list of needs.
Planning like this will also control any budget items that are not too important or can be postponed. As a result, business and personal financial stability is well maintained.
- Have a Plan for the Future
Good financial allocation planning will help you to have a bright future. This is used to have the right investment according to your needs, goals and personality.
Careful planning helps you plan and create financial assets for the future. Moreover, the value of future investments can increase according to the portfolio you choose, for example gold.
- Has Protection From Unexpected Events
Good financial planning will be very helpful if one day an unexpected event occurs. For example, if there is a motor vehicle accident or you are deceived by a fraudulent investment.
All unexpected events will be covered if you have a thorough income allocation plan. This happens because you have prepared an emergency fund for such events.
- Avoid Debt
Financial planning can make your life safe and avoid debt. This happens because all expenses have been placed in their respective posts. People who have a lot of debt usually don't have a good financial plan. As a result, there is no defined priority scale for spending every day.
- Clearer Life and Financial Goals
Most people have the same goals in life. Some concrete examples include buying a house, buying a car, paying for education, and so on. It cannot be denied that these goals are very important to achieve, and careful planning can help make them happen.
So, financial planning will help you in making plans and targets for the future. Apart from that, the right strategy will enable you to prepare for even the worst risks. So what are you waiting for, immediately design your personal financial planning!
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