Financial Planning Process

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Financial Planning Process

Financial planning process is a process of meeting your objectives through an appropriate management of your finances. Your goals can include buying a home, planning for your life after retirement, your child's education or even marriage. A defined financial planning process is used to produce a customized financial plan. We all know that financial planning is nothing more than a lifelong process of modernizing certain aspects of your self-knowledge. Perhaps, self-knowledge about financial planning would be the most powerful knowledge you could have to deal with the quantitative aspects of some possible circumstances and their consequences.

All the stages of your life, right from employment, home ownership, marriage, to parenthood, kid’s education or finally retirement, requires knowledge acquired through continual financial planning process. To achieve these and other goals people need to identify and set priorities. An organized financial planning process results in financial and personal satisfaction. You can take help of a personal financial planner or adviser to create the best financial plan.

Financial planning process involves six steps:

Identifying your current financial position- You should assess your current financial status and determine what you must do to make your goals. Your personal financial planner can be of great help while exploring your assets, liabilities, taxes and investments.

Develop financial objectives- Your financial goals and objectives should be examined periodically in order to differentiate your needs from your wants. You need to decide which financial goals are vital to be chased. The financial objectives can range from spending your current income to develop a house or an investment program for your secured future.

Determine and develop alternative course of action- Identifying and developing an alternative course of action is essential for making good decisions. Considering all the possible alternatives will help you to make more effective and satisfying decisions. Your personal financial planner should be able to recommend alternatives to address your goals based on the information you provide.

Evaluation of alternatives- You should continuously monitor or alter your financial decisions if required. Decision making will be an integral part of your financial planning process which will help you to consider the lost opportunities from your decisions.

Execute financial plan- It is the most important step of a financial planning process which involves bringing your financial plan into action. You may require the help of an assistant such as a financial planner for real investments. Your financial planner may carry out the execution, thus coordinating with you.

Constantly revising your plan- Financial planning process is a never ending dynamic process that requires a regular re-evaluation of your financial decisions. Your financial decisions may change depending on personal, social and economic factors.

Benefits of financial planning process:

1. A comprehensive financial planning process can improve the quality of your life and decrease the uncertainty about your future needs and resources.
2. All your financial affairs can be controlled by avoiding indebtness, bankruptcy or other economic insecurities.
3. Well planned financial planning process may improve your personal relationships.
4. A sense of freedom will be achieved by looking to the future expenses, and achieving your personal economic goals.

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