How to make personal financial planning strategies should be understood by young people from an early age. Good financial planning can be an advantage in the future that you can manage yourself or with professional help. Whether to achieve short-term or long-term goals, here are the basic strategies for good and stable finances.
How to Make Personal Financial Planning Strategies Successfully
- Set the Goals
First thing first, you need to think about creating clear financial goals (short term, medium term, or long term). When you focus on short-term financial planning, it means that you only plan your finances for about a year ahead. Examples of interests with short-term financial planning like this are for vacations or credit card payments.
However, if you want to focus on making medium-term financial planning, it means you plan for the next 1-5 years. The interests of planning like this are usually to buy a vehicle or pay off a house. While long-term planning is for goals of 5 years and above such as children’s education and retirement funds.
- Understand your Current Financial Situation
In making basic financial planning, the main thing you need to do is understand your financial condition first. Record your income and expenses in detail, such as your monthly salary, fixed salary, or income from side businesses. Then, record your monthly expenses starting from daily meals, transportations, to installments and other tertiary matters.
Financial planning process also involves your assets, including houses, vehicles and your savings to be recorded in detail. If you have debt, then this should also be included in your current financial position and needs to be recorded. Take your loans, credit cards, and even mortgages into account so that nothing is missed in financial planning.
- Budget Emergency Expenses
Financial planning is not only about understanding how much your daily income and expenses are. It’s also about making sure your expenses aren’t greater than your income and start putting cash away for emergency funds. Start realizing that setting aside income for emergency funds is just as important for unexpected things in the future.
Emergency fund planning isn’t as complicated as you think and doesn’t have to be a large amount of money. Save regularly every month, either through E-wallet or regular savings by applying the rule of 3-6 months of living expenses. Alternatively, you can start with 6 months of living expenses or 6-12 months of living expenses (if married).
- Create a Budget
Keys to good financial plans include how you create your own budget by using the 50/30/20 method. This means you need to set aside 50% of your income for primary needs, such as food and rent. Then the other 30% of your income can be used to go on vacation or hang out with friends.
There is still 20% of income that can be arranged to be put into savings or for debt payments. This 20% can also be collected and recorded as an emergency fund so that it can be used when urgent. Emergency funds are reserve money prepared in case of unexpected events, for example a sudden illness or job loss.
- Pay Off Debts
Paying off high-interest debt, such as credit card balances, payday loans, mortgages, and lease payments is part of financial planning. It’s a much better idea to prioritize paying off high-interest debt over lower-interest debt. A debt consolidation loan or debt management plan can help you when you’re dealing with revolving debt.
- Start Investing
How to make personal financial planning strategies for beginners is basically easy to learn and practice step by step. Aside from starting to save regularly every month, you should also start thinking about how to invest. Investing is also part of good financial planning so that your money doesn’t run out due to excessive spending.
If you have no experience in investing, then find an easy way to invest but with minimal risk. No need to focus on stocks right away if you are still a beginner, but try mutual funds first. To make a good investment and financial planning, you need to learn from many resources or ask for professional’s help.
How to make personal financial planning strategies doesn’t end at the investment stage so that money multiplies. Do the evaluation every month by checking your financial condition regularly. If necessary, you should also revise your budget and goals if there are changes in your life.
