Personal Financial Planning… Rules and Tips for Personal Financial Planning
Personal financial planning is a prerequisite for success in any business. It is a necessary humanitarian activity to face new events. In this sense, it is related to the future in which some positive or negative variables can be predicted. On the other hand, the future hides variables that cannot be predicted or anticipated. In all cases, we must be prepared to deal with all that comes up. So that we can continue our lives, and ensure ourselves a kind of stability and safety.
On the financial side, the need for personal financial planning is of great importance; Given that money is the lifeblood of life, and you cannot continue without it. Accordingly, financial planning receives the attention of everyone, whether they are individuals, groups, societies, or even countries. Because of its great impact on the quality of life in general. Before going into details, let’s first know what is meant by personal financial planning.
What is personal financial planning ?
Personal financial planning is a mental process of how to dispose of income in the future, and allocate part of it to meet future financial needs; Whether repeated or emergency.
Personal financial planning is linked to the theory of economic adulthood. Which assumes that a person by nature acts with rationality and rationality; He spends his money on his basic needs, and tries to cope with his limited income.
The goal of this personal financial planning process is to secure the right amount at the right time and for the right person to achieve his or her future financial goals and objectives; For example, a monthly amount is saved for spending on children’s education, buying a house or a car, or for retirement purposes. With the noticeable increase in new needs, their complexity and the inability to fulfill them at the same time, personal financial planning has become an urgent necessity at all levels, to avoid falling into financial problems resulting from chaos and confusion in spending behavior.
Some may think that the personal financial planning process requires complex skills and long experience, which individuals cannot do. However, this belief is not correct. All that the individual needs are simple skills that can be acquired and some basic concepts, and he will be able to secure his financial future with ease.
Personal financial planning is characterized by flexibility and ability to continuous review. It does not take on a single pattern throughout an individual’s life. Rather, it changes as needs change and vary in each stage. For example, the need to save for retirement arises when the children grow up and the many responsibilities towards them end. However, the necessity of financial planning must be emphasized in all stages of a person’s life, for a safe future.
Why do we need financial planning?
We need financial planning for two main reasons: the first; Planning for the anticipated needs, which are the needs related to predetermined requirements, such as home rent or school fees, etc. Usually the financial resources needed to meet these needs are known, whether from monthly income or from amounts saved from previous periods. The quality of the financial plan allocated for spending on basic needs can be judged by its ability to fulfill the requirement without there being a burden on the individual that might prevent him from his ability to fulfill them. Which may force him to borrow.
The second reason is related to planning for unforeseen needs, such as illness or dismissal from work and other events, which requires caution in the event that it occurs. Although these needs may or may not occur in the short term, the existence of a reserve item in the budget is important and indicates the awareness of the individual, which is required and important in personal financial planning.
How do I create a personal financial plan?
This is a vital question that may arise in the minds of many who are exhausted by their financial conditions and burdened by debts, and they always complain that their income is not enough for them at the end of the month, and they wonder how to get out of this predicament. If you are one of those, we tell you: Do not worry, the solution exists, easy and can be applied, and we are here to help you.
Personal financial planning… advice from the experts
Make a decision to start ;
controlling your finances from today, setting a budget through which to organize your financial life, and resolving to abide by it.
Understand your current financial situation;
Meaning that you accurately determine the sources of your income, how you spend it and what your expenses are. It is also imperative that you come up with a determination of your net income; Ie knowing what you got and what you got.
Do not try to skip the stages;
Determining your current expenditures and starting to direct and control them does not happen in a moment. Rather, it will take a period of time, ranging from 3-6 months, during which you accurately record everything you spend, in order to review it, and review some items that can be avoided completely, or reduce the amount you spend on them. ; This makes setting your budget realistic.
Get ready to tighten the belt;
Monitor your sources of income and expenses constantly, and with time the picture will become clearer to you, and at that time you must start making some difficult decisions about the terms of your expenses, and whether they can be eliminated, or at least reduced.
Pay yourself first;
After you have a clear personal financial plan and budget, you can start saving and saving. Here it is necessary to draw attention to the fact that saving does not mean that you start spending your income, then save what is left of it, but rather it means deducting part of your income or your salary – no matter how small – the moment you get it to save it. This way, you will have an amount that can be invested later in any way you choose.
Persevere to gain peace of mind;
The personal financial planning process is ongoing and is subject to continuous review. Take the time to review your budget lines, and over time you will feel that you have achieved something of value for yourself. Which leads to peace of mind and reassurance of the future.
Personal financial planning .. 7 rules of experts
We conclude this article with some valuable rules issued by experts in money management, which will have a positive impact on your financial life and will help you in personal financial planning.
- Change your way of thinking from just spending to saving for investment, and don’t forget that money makes money.
- There is a rule in personal financial planning that says: What you spend on housing should not exceed 30% of your monthly income, and you have to allocate 40% of it for basic needs, and there is nothing wrong with allocating 10% for entertainment. As for what remains, it is allocated for investment and facing emergency conditions. Note that these percentages may vary from one person to another based on his personal circumstances and sources of income.
- You can hire a financial advisor if you are unable to plan your finances on your own.
- Define your financial goals and what you want to achieve in the future. If you intend to establish your own business, you must be careful to save and control spending.
- Stay away from borrowing as much as you can, and deal with it as an enemy that could prevent you from achieving your goals. Do not borrow except when needed.
- Educate yourself and learn how to manage your money. Read all the resources you can access and view the online courses on personal financial planning. Don’t skimp on yourself taking the time to do this; The matter is important and it is about your future.
- Expect the worst. The most successful plans are those that depend on several scenarios, including the worst that can happen, and determine how to confront it, and in the event that it occurs, there is no surprise, but rather it can be confronted and adapted.
Finally, it becomes clear to us that the process of personal financial planning is not just an option that can be left, but rather a process that is indispensable for the sake of a secure future, and there is no alternative to it except for financial chaos and the resulting failure and continued suffering and unjustified discontent.
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Steps for Money Management and Financial Planning
A healthy financial future isn’t about how much money you make – it’s about how you manage and plan. Learn about financial planning and money management techniques to help get your finances in order, no matter your income, in this Better Money Habits video.