Financial Planning

Planning focuses on what to do? when to do? and how to do? To achieve the goal. Planning can be divided into three types:
* Long Term Planning
* Medium Term Planning and
* Short Term Planning.

First set your goal. To determine your goal ask yourself the question - where you are at present and where you want to be in near future? Answer of this question will help you to determine your goal. The term near future will be a time period of your goal and it may be some times 5 years to 10 years. This time period of 5 years to 10 years which you decided, will be your long term objective. Divide it into steps of 2 years to 3 years and this will be your medium term objective and again you can divide it into a short period of 2 months to 3 months period which will be your short term objective. Now take acton to achieve these goals. Evaluate action and its output in short time period. If it is going in right direction then good and if there is deviation from right direction, take corrective action.

What is Financial Planning ?

People have need and aspiration. Here is an example of a person who wants to become his son an MBBS. His son is now passed his 10th class. Father has to bear the expenses of education to become doctor. To become MBBS 12th standard needed. The expenses will be the educational expenses upto 12th, coaching expenses, education fee for MBBS education, hostel fee etc. Now he has to estimate the expected expenses for becoming doctor. The arrangement of these funds will be financial goal of father, and process of arrangement will be Financial Planning. Now we can say that Financial planning is the process of identifying future financial needs and aspiratios and prepare roadmap to achieve these needs and aspirations.

Earning, Expenses, Saving and Investment are four major elements of Financial Planning.

Earning is first element of financial planning. Always think about new and right ideas to earn more money. Right ideas means - your idea of earning should be right at social and legal level.

Expense is second element of financial planning. People earn money to spend. But your financial planning fully depend on your habits of spending. These habits of spending of your earned money helps you to become you rich, middle class or poor. If you spend money to earn more, you are opting the way of being rich, and if you spend money on buying luxurious items you are selecting the way of being middle class and if you are spending on unnecessary ways, you are on the way of being poor.

Saving is third element of financial planning. You can spend a portion of your earned money for your daily expenses and a portion can save and invest to earn more to achieve your financial goals.

Investment is fourth and most important element. Your earned money can earn more money to you through investment. Prepare your portfolio according to your risk appetite and needs.

If you want to know about model portfolio Know More about Model Portfolio