How Can Financial Planning be Useful in Achieving Financial Freedom?
consists of certain steps which you need to follow to gain success in your endeavors. Let us go through details of what these steps are.
Steps of Financial Planning
Step #1: Determination of Financial Condition
This is the very first step you need to take as part of financial planning so that you have clear understanding of income you are earning, how much your living expenses are, what percentage of your income you are able to save on a monthly basis and how much are your debts.
In addition to it, you will have to prepare a list of your debts as well as current assets to start financial planning in right manner.
Step #2: Creation of Financial Goals
In this second step you will have to:
• Perform regular analysis of your financial goals as well as values. This way it will become easier to differentiate between what your wants and needs are.
• Secondly, you should have clear financial goal which you would like to pursue. As for instance, you can have financial goals according to which you would like a certain amount of your income to go towards creation of an investment program.
Step #3: Search for Alternatives
An important aspect of financial planning will be development of alternative options so that you can make use of those options in case any uncertainties arise. An alternate path your financial plans can move into would generally be one of the following:
• Continue with same strategy
• Expand horizon of your financial plans
• Utilize alternate solutions
• Develop a completely new strategy to utilize
Thus, you will have to take into consideration all possible alternatives open for you and select the best one which will match your financial situation.
Step #4: Analyze Opportunity Cost
Financial planning will also consist of analyzing opportunity cost of utilizing any particular option instead of others. As such, you will have to understand the trade-off of any particular decision to be sure it will be worth taking that financial decision.
Moreover, you will have to analyze involved risks to be sure that you are making the right decisions. Additionally, financial conditions keep on changing, as such, you will have to modify your plans so that they continue to work in present situation as well.
Step #5: Implementation of Financial Plans
Here you will have to create an action plan so that right steps can be taken which will help in implementation of your financial goals. Additionally, it will be your responsibility to prioritize your goals and ensure that goals are achieved according to set plans.
Step #6: Re-evaluation of Financial Plans
Last, but the most important step of financial planning
will be reevaluation of your plans on regular basis so that necessary adjustments can be made according to changing scenarios.
To summarize it can be said that by taking right steps you will be able to ensure that your financial plans move in the right direction and help you achieve financial freedom.