The Importance of Financial Planning & How to Make It

Why is Financial Planning So Important? 

     Financial planning is one of the important things in managing finances, not only for business, but also for personal.

However, many people still ignore the importance of managing finances. Some even don't understand what financial planning is.

Financial planning is quite crucial, if you don't have financial planning, you will always feel that your income is not enough to meet your needs. To avoid that, it would be nice if you understood the importance of financial planning and how to make good financial planning.

What is Financial Planning?

Financial planning is the process of managing a person's/company's finances based on their financial goals. So that in its implementation, not only short-term goals need to be formulated, but also long-term ones.

Financial planning is an organizing activity that consists of formulating objectives, evaluating, and implementing, and also involves supervision or monitoring.

Each stage requires time dedication so that financial goals can be achieved to the fullest.

Apart from planning to implementation, you can adjust your financial goals for each time period.

Because financial planning is a long-term process, it must also be adaptive to living conditions. This is because financial planning for singles and people who already have children is different.

Why Financial Planning is Important?

Having a written financial plan gives you measurable goals to strive for. Because you can track your progress, you can reduce doubts or uncertainties about your decisions, and make adjustments to help overcome obstacles that could be holding you back. (schwab.com)

How to Make Financial Planning

Financial planning aims to avoid worry, protect assets and achieve long term goals.

You can direct the goals of financial planning according to your needs. In order to get precise financial planning, you can detail your short-term financial goals in detail first. Then how do you make financial planning?

Know your financial condition

The first way to make financial planning is to identify routine income and expenses so that you can make the right planning. Achieving your financial goals depends on how you recognize your own financial condition.

Create a monthly budget

Map with details what includes monthly expenses and the nominal amount. Do not minimize expenses, because it will produce inaccurate estimates.

Set aside money up front

The need for saving or investing must be balanced with the ability to set aside money at the beginning of the period, so that you are not tempted to spend it for consumption needs.

Minimize debt

Let alone only for consumptive purposes. Debt can cause a person trouble in the future. Therefore, don't get into debt, let alone just to follow your lifestyle.

Use apps to keep things concise

Don't think that financial planning will require sheets of paper like the old days. Now you can use an application on a smartphone to make it easier to record.

Budget for unexpected needs

An emergency fund is a special item where you will use it as protection when something untoward happens. Don't miss the emergency fund during budgeting. to anticipate sudden needs.

Evaluation and monitoring

After planning and carrying it out, don't forget to look back and assess it, whether there is anything that can be maximized and improved.

In addition, maintain your consistency so that financial goals can be achieved.

The Benefits of Financial Planning

Why should we make financial planning? Here are some benefits of making financial planning.

Budgeting

Budgeting in financial planning is a core activity, because the implementation and financial monitoring are carried out based on the results of the budgeting.

Making financial posts can help you not to overuse funds, to the point of cutting other budget funds.

Accurate monitoring of the financial condition

From financial planning, you can more accurately see where the money is going, so that your financial steps and decisions are more organized.

Helping investment planning

Investment funds in financial planning are cold money, meaning that the money does not go into any budget item. Therefore, the ability to identify cold money is very important if you want to get a return on your investment later.

Financial planning can also help filter what investments are suitable for prospective investors.

Someone who has many family members, and does not want to take on high investment risks, of course the choice of investment instruments is different from someone who has a high risk high return orientation.

Achieving financial goals more easily

At each phase of life, someone will have different financial priorities, so the level of difficulty will also be different. However, with financial planning, financial goals can be achieved more effectively.

Minimizing the possibility of debt

More focused financial decisions can suppress the desire to buy something beyond financial means.

By understanding exactly what the nominal amount of money is and how many items can be purchased using that money, one can avoid buying outside of his budget.

Realize asset purchase plans

In financial planning, some people might make asset ownership their long-term financial goal.

By implementing a good and correct financial plan, asset purchases can be made easier.

However, don't forget to consider long-term financial capacity and make precise calculations, so that these goals can be achieved within the specified timeframe, because how to make a financial plan also depends on how accurately a person assesses his financial capabilities.

Insurance planning

One of the financial instruments that are also important besides investment is insurance. With so many insurance options and costs, you should be able to set aside a small amount of money per month to protect yourself.

If you have objections to insurance funds, you can make projections of how much health costs or other costs will have to be incurred for not having insurance.