Definition of Financial Planning and How to Prepare it

Rancakmedia.com – According to the Indonesian Financial Planning Standards Board FPSB the notion of financial planning is a process to achieve one's life goals through integrated and planned financial management.

You must often hear the word 'Financial Planning' when you enter the world of work and start making your own money. However, not everyone really understands and not many have implemented the concept of Financial Planning. Financial Planning is very important to achieve the desired financial goals.

Financial Planning or Financial Planning will also help you identify which wishes need to be postponed and prioritized. Someone's Financial Planning is different from another based on each person's financial situation and what goals they want to achieve.

You will understand what Financial Planning is and how important it is for everyone to make Financial Planning from now on, after reading this article.

Understanding Complete Financial Planning

Before you go any further and explain how important Financial Planning is, what are its advantages and how to make the right Financial Planning, you need to first understand the concept of financial planning.

Financial Planning is a process in which a person tries to achieve different personal financial goals by implementing and developing a financial plan.

It is the process of simplifying a family's income, expenses, assets and different responsibilities to manage present and future needs. This includes Financial Planning. Simplification definitely seeks to achieve each individual's financial goals.

Financial Planning should be seen as a continuous process. They must develop a financial strategy to ensure that their economic situation remains stable as long as people exist.

If one financial goal is achieved, another major goal will emerge. Not only that, financial goals also tend to vary depending on one's financial situation, lifestyle and needs.

For example, the needs of an individual are different from those of a married person. The same goes for financial goals. The financial goals that a person wants to achieve before and after marriage are very different and the priorities are certainly different.

Elements of Financial Planning

There are many elements in Financial Planning. Elements to pay attention to include:

Financial Goals To Be Achieved

It's a good idea to describe your financial goals in as much detail as possible so you can determine what actions need to be taken to achieve these goals.

Timeframe Required

When applied to your financial plan, the sooner the better. Set a target time to achieve the goals you set in the previous item. This will make you more.

Action plan

A plan will not be completed if concrete action is not taken to achieve the goal. Clearly and realistically define short term and short term actions. Make sure you are getting closer to your goal every step you take.

Financial Resources

Of course, what is called Financial Planning must be a source of finance that becomes the "engine" for all your goals. These resources can take many forms, such as income, additional income, operating profits, stock dividends and many more. Financial resources will be directly related to your future financial goals.

Risk Factors

Consider all the hazards associated with the plan when doing Financial Planning. Consideration of risk is often associated with financial resources. For example, if your primary resource is your monthly wages, then the element of risk involved is whether you one day get fired from your job or retire.

The following five elements are important and mutually influential. If only one aspect is missing, Financial Planning will not be built properly.

Why is it Important for Financial Planning?

Those of you who are new to Financial Planning will surely wonder why anyone is preparing. Have you ever forgotten and confused about where all your money has gone, if you are one of those people who don't understand the importance of Financial Planning?

After you get a monthly income, your money is almost gone without you knowing it, but your savings are minimal. Financial Planning is different from tracking expenses. Financial planning is much more complicated because it includes goals that you want to achieve financially.

Definition of Financial Planning

Well, this is where the importance of Financial Planning. You need a financial plan to achieve all your financial goals. This will prevent you from spending more money than you should and more than you can. A happy and successful life will be a dream that will never come true without adequate financial preparation.

Financial Planning is also one of the greatest safeguards for everyone. We never know all that will happen in the future. For example, no one can promise that, even if you currently have a stable job with a good income, you will not lose your job.

Who knows your business has to reduce its staff and you will lose your job. Or you have an accident that requires you to quit your job for a while. If you have a mature financial strategy, during this crisis, you don't have to worry about your life. Even if your financial situation worsens, you can still provide for your family's daily needs.

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