A Guide to Financial Planning

09/08/2021

Financial planning refers to the systematic planning and management of an organization's resources. In simple terms, it is all about making smart financial decisions. In simpler terms, it is about budgeting and savings for the future. The latter refers to reducing expenses in today's cutthroat economic environment. In essence, financial planning is a blueprint of future financial objectives and performance.

In basic economic usage, a financial planning process is simply a detailed analysis of an individual's current payables and existing financial position with respect to his/her financial goals. These goals are called relevant expenditures (that is, what the money will be used on). The next step involves projecting these relevant expenditures onto the coming 10-year period. This process is called long-term analysis. Now, if you were to look at it from the reverse side, your goal in the next decade would simply be to reduce the level of interest you pay on your debt, increase your savings rate, and make use of the cash that you have accumulated to repay your debts in full.

Your life goals are your roadmap towards achieving your financial goals. A well-planned financial planning process should first focus on setting life goals. Life goals are the driving force behind your savings, investment, and spending decisions. They will determine your short-term and long-term strategies for attaining your relevant expenses, reducing your debt burden, and increasing your savings rate. Thus, they help you achieve your long-term objectives. Click here for more info.

When you have set your life goals, now it is time to organize your personal financial planning process. This involves drawing up a good financial plan with all the relevant details regarding how you will achieve the set goals. You will basically have two different options. You can either make your own financial plan or draw up an ERISA (Employee Retirement Account).

By way of simplifying things, we will be discussing only your ERISA cash flow planning decision. To begin with, it will be necessary to determine the total amount of your expenses including both your short term and long term expenses. The purpose of this is to know the difference between your long-term expenses and your short term expenses. This difference will be your source of funding for savings, investments, and the like.

Your short term expenses will include your monthly living expenses such as your housing costs, vehicle expenses, and even utilities. These will include all your basic necessities like food, water, electricity, internet access, telephone line, television, etc. On the other hand, your long term expenses will include your investments, savings, and insurance policies, and all the other expenditures that will not be eliminated by any short term plans. The financial planners should give you options regarding these two types of expenses to get you a clearer picture of your financial goals. Browse more at https://phillipjamesfinancial.com/our-services.

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