Most people develop a pattern of financial behavior through trial and error. Although they maintain financial records, often the records are poorly organized and difficult to locate. Decisions that are based on these records are flawed, as they do not reflect true financial position of the individual.
Financial planning is the process of developing and implementing a coordinated series of financial plans to achieve financial success.
Benefits of financial planning.
1#. Enables an individual to undertake a self assessment of his financial picture; i.e. understand his cashflow, net-worth, investments e.t.c
2#. Financial planning helps one to attain financial empowerment through increased financial intelligence.
3#. An individual can align financial goals with life goals.
4#. Gives a clear and realistic financial roadmap to financial independence.
5#. Financial planning can help an individual live a debt free life if properly executed.
Components of a successful personal financial planning.
1#. Specific individual values.
Every person is unique in his on way; people holds different values in life. Financial planning grow out of this values.
2#. Financial goals.
Personal financial goals should be specific, and realistic in terms of amount of money and time bound. These goals should be consistent with the individual values.
3#. Informed projections about the economy.
While planning its adviceble to consider economic factors such as inflation rate, interest rates e.t.c.
4#. Consistency.
Financial planning should be consistent and logical. These are predetermined actions in specific situations.
By John Muchiri.
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