The Five Principles of Financial Planning
Written by Margaret Johnson | Tuesday, 10 August 2010
Most of our clients at Solutions come to us with a challenging financial status, in need of help and counselling. We have a very thorough and successful approach and we work through the nitty-gritty with each case giving our personal attention. Many people struggle with knowing where to start in building a strategy in financial planning; we definitely help you with that, but it's important to highlight where to begin: back to the basics and start from ground zero with the five principles of financial planning. I can't tell you how many people have that A-ha! moment once they realize how manageable their money and spending can be.
1: Goals must be identified before they can be achieved.
For most of us, it is usual to have more goals than money; priorities must be attached to goals to reflect their importance in our lives.
2: Evaluation and understanding of present financial resources is basic to future planning.
Assemble all records of income and expenses for the past year, as well as a list of your assets and debts.
3: Balanced cash flows.
Refer back to your past spending to help you estimate the cost of your basic living expenses. Draw up a plan for a specific time period, perhaps one year, which includes a statement of your anticipated income and the way in which you plan to spend it; this plan is called a budget. Use our personalized budget sheet - It's there to help you!
4: Creating strategies for the implementation and control of the plan.
Plans are intended to direct some action and to manage changes as they occur.
5: Ongoing evaluation.
Effective financial management requires the ongoing evaluation of plans and implementation strategies to keep the plan relevant and effective.
All of us have personal goals; our financial goals are usually related to the personal goals that we have. Knowing where we want to go, when we want to get there, and how much it will cost are the fundamental building blocks of credit planning and goal setting.
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