Financial planning – A simple way
” The success of life is not in creating wealth but in completing financial goals successfully ”
As we are at the next step of financial planning after tax saving, now it is important to look at our cash flows. Financial planning is about streamlining cash flows towards achieving your financial goals.
The foremost important thing which we should know – if we really want to become financially successful then we should have a control on Cash flow.
Many of the time people complain that they have been earning since many years, not spending much but still do not have sufficient money with them not good assets.
This clearly shows that they do not have direct control on their finances, cash flows.
We should know what is happening with our money. How it is being invested and where it will lead you.
The first thing which is comes in to mind after getting our earnings in hand is expenses.
Let’s start with how we spend: the expenses are main, integral part of life and the first cash outflow from our pocket. The expenses depend on the standard of living and how you look towards life. Most of the times it is said that
Income – Savings = Expenses
However it is a very wrong concept, I am against this, this is the way to look only towards your future and unfortunately future never becomes present.
It is very important to be satisfied today and then plan for future, if you are happy about the today’s then only you can enjoy tomorrow, but yes it doesn’t mean that you should spend all your earnings to satisfy yourself. There should be some planning for your expense even. To have a Good financial future we should know what portion of the income we can utilize for expenses majorly household & lifestyle expenses.
In the initial phase of your career you may not be able to save, may be 100% of your income since a part of it is going towards expenses, the same happens when the family expands. But ignoring these some exceptions the monthly expenses should be in the range of 30% to 35% of monthly income, if it is more than that without the major change in family structure or major exceptional expenses then it should ring a warning bell!
It is suggested to write down your expenses so you can keep track and analyse your spending pattern and even take corrective steps if expenses in certain areas are higher than desired. This simple process will help you to save 10% of your expenses which in turn can boost your savings.
This is important aspect of financial planning which make or break your financial future.
The rule for financial planning which I believe is
Income – Expenses = Savings
The funds which are available after expense should be channelized in the right way to fulfil the financial goals.
Financial planning is more important for people who are having limited income as they have to complete unlimited dreams and liabilities.
Every step counts…………………………..