With a personal financial planning you can analyze current economic situation, set your goals to achieve and formulate plans that allow you to achieve those objectives.
Through financial planning you should obtain a better handle on your personal finances and an improvement in your financial situation. We give you five steps to get you started with personal financial planning:
Know your financial situation
The first step in personal financial planning is to know your financial situation. For this, the ideal to make a personal statement:
Make a list of your income (salary, business, rent, etc.) and your expenses (food, education, public services, etc.) and then subtract the total expenses of the total income and see how much you remain.
Analyze your financial situation
With the information you get from your financial status have to analyze your personal financial situation, for example, your Personal Financial Statement can reflect your income is not enough to cover your expenses or you’re spending too much money on “eating out or recreation”.
Set financial goals
After analyzing your financial situation, do not worry; take action to improve the situation. Now you have to set financial goals.
First you have to make your overall objectives, these you will serve as a guide to specific objectives. Examples: Increase your income or lower your debts or save more money.
And then based on your overall goals, you have to set your specific objectives, these will help you to measure your progress towards your overall goal, some examples: reduce your monthly expenses by 30% for next month or save $100 per week or cancel total debt for the second quarter.
Design your action plan
Once you’ve set your financial goals, the next step is to make plans that allow you to achieve that objective. For example, to increase your income, we could establish such plans request an increase in soil, seek new employment, increase sales of your business, etc.
To reduce your expenses, you could set as stop buying cafes plan, I eat more often at home or go out to eat once a week, etc.
To cancel your debt, you could set to plan cut credit cards, consolidate all of your debts, allocate a percentage of your income for the cancellation of debts, etc.
Develops a personal budget
After defining your action plans, the last step in a personal financial planning is to develop a personal budget.
In this personal budget, you have to itemize income (wages, business, rental income, etc.) and expenses (food, education, services, etc.), and the balance (revenue minus expenses) expect to have for following months of the year; based on your financial situation and your action plans.
And, finally, for a better personal financial planning, as well as the personal budget, we could also develop a projected personal income statement, and a projected personal balance, i.e. an income statement and a balance sheet as we project that they would be for a future date.