Financial planning can be defined as a systematic method for helping people make decisions concerning their financial affairs and goals. In simple terms, it is the art of creating a “plan” that will guide individuals towards reaching their financial goals. Financial planning doesn’t necessarily require the services of an expensive accountant or money manager, and it doesn’t even need to be performed in the presence of other people. The process may be carried out entirely on your own through a series of steps that include: identifying your financial goals, coming up with a realistic but workable long-term strategy, evaluating various aspects of your strategy, communicating your strategy to others involved in your life, and monitoring and reviewing your progress. This process is continuous and never-ending, and requires determination and commitment from each individual involved in the process.
One of the major advantages of financial planning is that it guides individuals towards achieving long-term goals and prevents them from going through a lot of unnecessary hassles. This long-term planning also helps in preventing financial setbacks such as bankruptcy, job loss, and financial setbacks such as foreclosures. Moreover, by establishing a well-prepared financial plan in the early years, one can easily avoid some of the more serious pitfalls of the latter part of life, such as retirement. By setting and achieving long-term goals, you can actually make wiser use of your resources and enjoy a more comfortable retirement period, without feeling the pinch of financial difficulties and without being forced to prematurely retire for reasons that are not always favorable.
The first step in financial planning is to set a savings goal and to build on this goal throughout your working lifetime. There are a number of ways to save money, among which may include: investing in stocks and bonds, saving for a down payment on a house, maintaining a healthy savings account, and setting aside money for retirement. In addition to these avenues, there are a number of additional options that could be taken into account, depending on individual preferences and financial goals.