Finance is a very important part of our lives. Without sufficient finance it is really difficult to lead a life properly. Therefore, in order to lead a tension free life it is very important to plan your finances efficiently so that you can avoid unnecessary problems in terms of money. Usually, people do not understand the importance of financial planning, as a result they start planning late. In fact most of the people do not have a comprehensive financial plan and do not even know why they need one. This is not correct, it is important for the people understand Personal Financial Plan, why do they need it and when should they develop it.
Actually, Personal Financial Plan can be defined as a systematic process which helps in managing an individual’s financial resources and providing personal satisfaction. There are several advantages of this plan. They are:
1) It enables an individual to control his or her financial circumstances thereby protecting from increased stress and tension that may arise due to insufficient funds.
2) It reduces uncertainty in life.
3) It helps in avoiding unnecessary burden of debt.
4) It reduces economic dependency on others.
5) It enables individuals to achieve their financial goals on time.
Thus, it can be said that it is really beneficial to plan your finances and avail its several advantages.
Personal Financial Planning is referred to as a method by which one can set personal goals for future. In fact it is an act of inventory of one’s assets and liabilities. This planning can be done by people themselves or they can seek help from personal financial planners. When planning personal finances it becomes very important to collect all financial documents and keep them properly in a place. These financial documents should include statements, savings accounts, investments, retirement accounts along with any other assets. They should also include debts like student loans, credit card debt, mortgages or car loans. All these documents are very helpful in proper financial planning.
The main purpose of Personal Financial Planning is to live a debt free comfortable life. However, this is possible only when one has complete knowledge of all his debt and income. A monthly budget can be considered as a wonderful way of financial planning as it describes where all money is actually going. It also enables one to repay the debts on time and save some money as well. It also helps in creating a short term plan as well as long term plan.
It is also important to do Retirement Planning. Retirement is that phase when people want to lead a relaxed life after so many years of hard work. After retirement people want to do all those things which they have missed while carrying the burden responsibilities. However, all this is possible only when you have planned your funds efficiently.
Retirement Planning is important because the pension that is received post retirement is so less that leading a smooth life becomes really difficult. Therefore, it is essential to plan finances properly to lead a financially secured life.
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