STEP BY STEP PROCESS WHICH IS IMPORTANT TO CREATE A GOOD FINANCIAL PLAN

Financial planning is a logical procedure. One can create its own plan by going through all the steps carefully. In this article, we will discuss the 5 steps required to create or build a financial plan.

  1. Determine your present financial condition
    The first step for making a good financial plan is determining your financial situation with regard to your income levels, living expenses, savings, and debts. Prepare a list of your assets and debts and evaluate your financial condition. Assessing your financial condition will help you realise how much you need to invest in the available investment options.
  2. Develop your financial goals
    The objective of establishing your financial goal is to lay the foundation of planning. Several people just save and invest money without any specific goals in mind. Hence, the next step of financial planning is to define your goals, that entails writing down or formalising your financial goals, attaching respective costs to them and determining the timeline for achieving these goals.

Only when you set your goals, analyse them and decide if you’re willing to make the financial commitment necessary, you move closer to achieving your goals.

  1. Convert your financial goals into a financial plan

The next step of the process is to develop an action plan to attain your goals. A good financial plan includes a controlled and informed budget, regulates your investment strategy and reflects your personal goals. This step further involves three sub-steps, which are:

  1. Linking your current assets with your financial goals
  2. Linking your present and future savings to your financial goals
  3. Creating alternatives – Developing an alternative is crucial for making a good financial plan.
  4. Evaluate your alternatives
    Once you have drafted your final goal strategy, the next step is to scout for the right assets for each goal. However, firstly you should be acquainted with different types of investments available to you:
  • Equity
  • debt
  • Corporate debt
  • Real estate
  • Small savings scheme
  • CryptoCurrency
  • Insurance
  • Gold, etc.

You should choose the assets based on the following factors:

  • Your risk appetite
  • Risk of each asset under consideration
  • Pros and cons of each asset
  1. Create and implement your financial plan
    Thenext step in creating a financial plan is implementing your plan. Though this is not the last step, most of the difficult work is behind you. In this step, you need to draft an action plan. Your action plan must entail all the tasks that you have to accomplish to improve your financial situation.When implementing a financial plan, you can consider relying on the expertise of specialists such as insurance agents, tax professionals, mutual fund/stock distributors, etc.

Do not forget to reevaluate your financial plan every now and then. Now that you have understood the importance of saving and creating a financial plan, get on to it and consider different investment options. Your goals are just a few steps away. Happy investing!

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