In simple terms, a financial planning principle is a detailed analysis of an individuals current and future financial situation with the use of various known economic factors to predict future expenses, income and even withdrawal strategies. The process is predicated upon the notion that a person’s financial well-being is largely dependent upon their ability to make sound financial decisions. This is why a good financial planning principle must take into consideration every aspect of a person’s life including their spending habits, savings and investing options, retirement options and any other significant financial decisions such as purchasing a new home or vehicle. A well-planned financial planning principle will serve to assist in providing the needed financial security for the individual while at the same time ensuring that he meets his financial obligations.
Therefore, a sound financial planning principle must first achieve specific, predetermined goals. These goals must then be realized through a systematic method that would then provide a well planned out schedule for achieving them. These goals should be realistic and achievable, which is why it is important to set achievable and realistic goals. Also, a financial planning principle should use proven methods to achieve these goals. Examples include educating oneself on different investment techniques, setting financial goals and developing a specific investment portfolio.
After achieving the set goals, a final plan for attaining them should then be developed. This final plan should be based upon the previously determined goals as well as the previously stated principle of financial planning. It should also incorporate a detailed savings strategy that is designed to meet each of the individual’s estimated future financial needs. The primary objective of savings is to ensure long term viability for the investments that have been made thus far.