Tips for Sound Personal Financial Planning

Financial planning is something we all know we need to do, but always put off for the future. Financial Planning requires Financial Discipline, which is so difficult to practice in the current era of consumerism. However, financial planning is very important because you want to retire one day, be financially stable in the event of an accident, or unexpected loss of a job.

Money plays an important role in your life. Yet, when you have it, it is seldom given the importance it deserves. You look forward to earning more money rather than managing the money that you already have. You have plans for your time and your jobs - you carry PDAs, smart phones and organisers to keep track of your life. However, when it comes to keeping track of your money the performance is more often than not dis-satisfactory even by your own standards. It is a mistake as prudent financial planning can help you make the most of your money and ensures your prosperous future.

Getting your financial planning started is a difficult thing, but once you have made financial planning part of your routine, it won't seem that difficult. Financial planning means sitting down and creating a plan of action that will help to save you money. It involves

1.     Identifying your financial goals (say retirement, child education etc),
2.     Identifying your current position (net worth and cash flow position), and finally
3.     Charting out a plan to achieve the above goals.

The following tips will help get you in gear to start your financial planning and motivate you to make financial planning one of your main goals.

Spend less than you earn - If you spend everything you make - regardless of how much you make - you will never be wealthy. The greater the gap between earning and spending, the faster you build (or lose) wealth. Spending less than you earn is the only way to achieve long-term financial security. It is easier to spend less than it is to earn more. It doesn't always involve making big sacrifices and a fine-tuning on your spending pattern can result in big savings in the long-run.

Prepare and strictly follow budget - A budget or spending plan is necessary for successful financial planning. Common financial problems like overusing credit, lacking a regular savings program, and failing to ensure future financial security can be minimized through budgeting. Budgets aren't meant to control you, and they shouldn't prevent you from enjoying life. In fact, when done properly, budgeting doesn't make you spend less on the stuff you want; it helps you spend more on the stuff that matters.

Savings must be a Priority - Before you pay your usual bills, buy groceries, or do anything else, you should set aside some part of your income. Remember the golden words 'Pay yourself first'. Start small if you have to (even 5-10% of your income a month is good), and then increase your saving rate with time. One thing to note here is that merely savings are not enough unless they are channelized into productive investments.

Clear your credit card debt - Credit cards are something to be very, very careful with. Those little pieces of plastic are so easy to use, and it's so easy to forget that its real money you're dealing with when you whip them out to pay for a purchase, whether large or small. You can easily get into credit difficulties if you fail to understand how and when to use credit.

Start early - Make time your ally in pursuing your financial goals. Compounding is a remarkably powerful wealth-building process that can turn relatively modest amounts of money into a fortune - provided you give the investment time to work. Action beats inaction. It's easy to put things off, but the sooner you start moving toward your goals, the easier they'll be to reach.

The perfect is the enemy of the good -Too many people are afraid to start getting their finances in order because they don't know what the "best" first step is. Don't worry about getting things exactly right-just choose a good option and do something to get started. The time to start planning for your financial future is NOW... at this very moment. Remember the old saying: Today is the first day of the rest of your life.

For successful financial planning, know where you are now, know where you want to be, and be persistent in your efforts to get there...

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