Have you ever heard to phrase “financial planning” only to wonder what it means? You know that it has to do with money and planning, but what could it possibly have to do with you? Financial planning is a simple term even if it sounds like a complicated business term. Financial planning is simple identifying and meeting finance goals such as saving for a house or retirement.
You may not realize it, but every time you make a financial decision, you are participating in financial planning. When you decide to buy a house, you are planning your finances. When you decide to ask for a promotion, you are planning your finances. When you decide to drive less to save money on gas, you are planning your finances.
Financial planning has several different aspects. You start by making your financial goals. Your goals will depend on where you are in your life. You should have short-term and long-term goals. Short-term goals include saving to buy a car in a year, saving for a down-payment on a house, paying off debt, or saving $1,500 in your retirement account by the end of the year.
Long-term goals are usually goals that will take more than five years. Common long-term goals including saving for retirement, paying off your mortgage, saving for you kids college. You should always keep both sets of goals in mind, but concentrate on the short-term goals. If you break up your long-term goals into short-term goals, you will make sure that you are always staying up with all your goals. This could mean having a goal of having $200,000 in your retirement account within the next five years. It’s part of your long-term goal, but you’ve made it into a short-term goal.
Next, you need to make a budget. A budget will tell you what you can and can’t spend your money on so that you are able to put more of your money towards savings. The general idea is to make more and spend less, and the best way to do that is by budgeting.
Watch your money and work towards your goals. As you get closer and closer, your money will start growing faster as long as you invest it or put it into a high interest savings account. Once you reach your goals, you will feel very accomplished. Don’t give up, just keep planning, saving, and making goals!