Personal finance planning: analysis, planning, financial goals and how to achieve them

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The question of where to get money is relevant for most residents of our country. The reason for this is simple - there are always not enough of them, but you want to afford more. It seems that a large number of banknotes in your pocket will save any situation, but in reality, without personal financial planning, they can go for all sorts of nonsense, like buying a new video set-top box or a set of toys.

When is the need for planning?

Governments of different countries annually report on economic growth and the well-being of citizens, but this is far from always true. The real incomes of the inhabitants of a particular country often differ significantly from those that are revealed by various measurements. Your salary may be in line with the figures given, or it may be significantly below the average, and the regulators may not be aware of this. If you are not too lucky with your salary, you will have to start planning personalfinance, this is necessary for a more competent distribution of cash flows that come to your family.

The constant lack of money is far from the only reason that requires a financial plan and its further implementation. For example, if you're planning to go on vacation and can't afford to buy a vacation package right away, the most convenient way to get the money you need is to set aside a portion of your salary each month. A similar rule applies to the acquisition of new things, training, repairing broken home utensils, etc. If the budget is formed correctly, you will notice in the very near future that you have enough money for absolutely all your desires and needs.

Another reason forcing you to come to grips with the financial planning of your personal budget is social insecurity. At any moment, an event can occur that will negatively affect your income - layoffs, prolonged illness, economic crises, etc. If you do not know how to correctly allocate your own finances, you can face a lot of problems, so it’s better to learn how to do it in advance.

Where to start?

The essence of personal financial planning is to accurately record your own income and expenses, which should be as honest as possible. A well-designed plan should take into account absolutely all your expenses, up to buying ice cream or a carton of milk. At first, it can be quite difficult to overcome yourself and write down absolutely all financi altransactions made in the reporting period, but the result is worth it.

Get yourself a separate notebook in which you will record all your financial income and expenses. You should not rely only on your own memory, you are unlikely to be able to remember small expenses, in addition, you will most likely have to operate with the cash flows of your household, which will add additional mental load.

Accounting must be kept for a month, after which it is possible to conduct a primary analysis of the data obtained. If you make all transactions using a bank card, then the entire history can be viewed in the personal account of a financial institution, but all cash purchases will have to be recorded. It is more convenient for someone to save checks, for someone it is easier to write down purchases in a notebook or application - everyone chooses the most convenient option for themselves.

How are unmanaged expenses dangerous for the budget?

People who are far from large cash flows, financial planning is much easier, their financial planning system mainly consists of costs that cannot be influenced. These include utility bills, transportation costs, loan payments, etc. Reducing them is difficult enough, and often can be done only by depriving yourself of certain amenities.

It is also customary to put gifts here for holidays and birthdays, a fairly large amount of money goes here throughout the year. Experienced financial managers recommend planning in advance the amount of gifts and theirquantity, due to this, it is possible to avoid a situation where a person at the very last moment is looking for money for a gift and takes it from those that were set aside for more important things. Don't forget to plan expenses for your own birthday as well, if that's what you're going to be celebrating.

There is an opinion that these costs should be put up with and not try to reduce them, but not everyone agrees with him. If suddenly a person is left without a job, it will be difficult for him to cope with a large number of expenses. That is why it is worth trying to reduce unmanageable expenses, it will be much easier to do this if you have a loan. For example, your monthly loan payment is 6,500 rubles, but you can afford to pay 2-3 thousand more per month. Already the next month after the increased payment, you will notice that the amount of the contribution has become a little less. A gradual reduction in the payment will allow you to save a fairly large amount and not overpay the bank extra interest.

What can you refuse?

Managed spending is the most interesting part of financial planning. In the financial planning system, they should play a major role. It is much more productive to break them down into different categories - "entertainment", "sports", "food", etc., this will help you decide where exactly the majority of your money goes. Those figures that you will receive during the analysis of the previous period should be considered as initial data for planning.

When drawing up a plan for the future, you need to determine for each categorythe most comfortable amount. Be prepared for the fact that it will not match the one that is obtained in the general accounting of expenses for the new month. It's best to budget only what you really need and add some extra money to allow for some maneuvering.

Home financial planning should be built taking into account financial and time possibilities. For example, if you often dine at a cafe and decide to give it up, the gain in money will be significant. But the time spent on the purchase of products and their preparation can increase several times. If you can only cook once a week, then it's best to cook for 2-3 working days right away, and the rest of the evenings you can afford to dine out.

Those who are just starting to plan their budget often make a gross mistake - they completely deny themselves entertainment. It is impossible to do without them at all, sooner or later you will start to get nervous and break loose, spending a lot of money. Plan a certain amount for going to the movies and other places of entertainment and try not to go beyond it. At the same time, it would be nice to think about whether it is possible to replace evening trips to the cinema with morning ones, and trips to an expensive fitness club by buying a subscription to a regular “rocking chair”, and thereby save a lot.

How to budget for the future?

Once you have analyzed your expenses and described them, you can do financial planning, personal finance distribution will be much easier. Create a family budgetmuch more difficult, since this activity requires taking into account the needs of all family members. To form a personal plan, you need to know three things - the current balance, your plans for the future and the budget that you need. The most important thing is to answer the question of how much money will make you happy.

Financialists believe that every financial plan must have a specific goal, only then it will be fully implemented. For example, if you want to buy a new car, you might think not only about how much you need to save from your paycheck, but also about how to earn extra money.

Such a plan provides for the creation of a register of all expenses that will fall on your shoulders in the current reporting period. As soon as you prepare a general list of costs, the amount that you need to implement all plans will become clear. Then you need to make a list of sources from which you expect cash receipts during the month and indicate the total income. All informal earnings should be taken into account in financial planning, personal finances can only be spent as efficiently as possible if you are honest with yourself.

After getting the totals of income and expenses, you will be able to understand which item of expenditure takes you the most money and reduce it as much as possible. In addition, you will immediately see exactly what amount you lack in order to feel comfortable and to think about the implementation of your goals.dreams.

Can budgeting be secure?

If you haven't made a financial planning plan before, you can take existing options and stick to them. There are three main types of such plans, on the basis of which you can make your own. The first of them is a kind of program that protects you from natural disasters, impoverished old age, and other troubles.

The main measures that can be taken here, in addition to the standard distribution of income, can be considered insurance of all existing property and life, as well as the formation of a financial cushion, the main task of which is to provide you with finances for at least six months. It is also customary to include a pension program in the form of a long-term deposit, which will help you feel comfortable in the situation when you cannot work.

Thus, planning your own finances in this case should be carried out so that part of the income received goes to the above programs. However, there is an additional caveat here - in the presence of credit loans, it is very difficult to form a financial airbag. In this case, it is possible to comply with insurance and a pension deposit, but this is also fraught with difficulties, which is why it is recommended to pay off all your debts first.

What to do when debt is over?

The next financial planning system is called "Comfort", it is familiar to absolutely everyone, and most often implies the presence of one's own housing,transport, summer cottages, as well as the opportunity to arrange a vacation for the whole family at least once a year. Even if you earn well enough, it is better to save the necessary amount in advance. For example, if you plan to move into a larger apartment in five years, you need to save up enough money, along with the proceeds from the sale of your old home, to buy a new one.

If you plan to give your children the highest quality education, this will also have to be taken care of in advance. Distribute your finances in such a way that some of them go to the further education of your children. You can open a special deposit account with interest, which will increase annually depending on the accumulated amount.

This financial planning system is suitable for those who have a steady income and only plan to increase it. The most important thing here is to determine the goal that you want to achieve, based on this you can figure out how much money you need to achieve it. The goal should be realistic, achievable and limited in time, then it will be easier for you to achieve it.

How to get rich?

Proper financial planning of your personal budget should lead you to the idea of creating your own business, which in the future will help you retire and enjoy life without thinking about money. You can easily save up the amount you need to open a business, and then you won’t have to apply for loans from financial institutions.organizations.

Your assets in this case will be activities and funds that allow you to make a profit - shares, securities, etc. This will also include your monthly salary if you continue to work in parallel in any organizations, as well as money you have lent to your friends. The use of assets should help you get additional benefits, which can also be expressed in non-material terms, for example, money spent on vacation will give you the opportunity to relax, and then return to work with renewed vigor and make it more productive.

Today, there are three parts of personal financial planning: assets, liabilities, net worth. Liabilities should include all monetary obligations and debts - loans, taxes, utility bills, etc. Their main difference from assets lies in the intangible component, liabilities cannot be touched, they are abstract units.

Net equity in this case will be the difference obtained by deducting liabilities from assets. There are several options that allow you to significantly increase this amount: your own business, generating passive income through real estate, investing in securities, etc. The easiest option is to purchase your own home for subsequent rental, this will not require a lot of effort and knowledge.

The most profitable way to get rich, many still consider organizing their own business, however, to itfew come. Frightening factors here are the need to build the process from scratch, lack of experience and unwillingness to delve into accounting wisdom. However, the choice in this case is an individual thing, and everyone decides for himself.

How to set a goal and achieve it?

Personal financial planning assumes that you have a specific and time-limited task that you want to solve. For example, you want to buy a car worth 300 thousand rubles. The monthly salary is 40 thousand rubles, of which about 15 is spent on paying loans, utilities and other obligations. The remaining 25 thousand rubles will need to be distributed among all pre-compiled categories of managed expenses.

Suppose that you spend about 5 thousand rubles on entertainment every month. You can’t completely abandon them, but you can modify the activities themselves so that they take a little less money than usual. If you have fun for 2 thousand rubles, the remaining three can be used in a more useful way - to save for the car. But saving for 100 months is not the best way, so you can think about an alternative option - you can increase the amount of payment on credit loans every month, which will reduce the repayment period and get rid of them faster. The released funds can be set aside for the purchase of a car, and the time for collecting money will be significantly reduced.

Is there a single budgeting algorithm?

Because every person is different andhas its own goals, it is impossible to form a general scheme for creating a monetary plan. It is much more efficient in this case to adhere to the main stages of financial planning - an analysis of current expenses, a list of assets and liabilities for the next reporting period, the formation of goals, the direct creation of the plan itself, its implementation and final analysis.

These stages can be mixed with each other and supplemented with those that can help you in solving your tasks. The greatest effect can be achieved by taking into work absolutely all of them. If necessary, you can use the services of financial consultants who will help you deal with the preparation of a plan for the coming period.

What must a financial plan consider?

The basics of personal financial planning should take into account the individual characteristics of the originator. The document may reflect your personal parameters - gender, age, lifestyle, and even the city in which you live. The plan should clearly reflect your financial goals, preferably they give specific answers about what you want to receive, when and how much it costs. If it is difficult to determine them, you can use the SMART methodology - according to it, tasks must be precise, measurable, assignable, real and limited in time.

Review the financial planning you have made. Calculate whether it is realistic to achieve your goals, provided that the current state of affairs does not change. If you are working with investment instruments, you will need to immediately determine the level of risk that you are willing to take. Based on this, you will have to make a decision about where to distribute free money. Experienced financiers believe that before you start investing, you need to form a “cushion” - savings that will last you at least six months, provided that you do not change your current standard of living.

Personal finance planning carried out should change periodically, it will directly depend on the life changes that happen to you. Career advancement, job change, growth in business turnover - all this forces a change in the distribution of cash flows. It is advisable to carry out such an adjustment at least once every two to three months.

How difficult is budgeting for a whole family?

Planning personal finances and a family budget at the same time is much more difficult than drawing up a financial plan for one person. The main reason for this is the need to take into account the goals and objectives of other family members. They may differ significantly from yours, so you will have to learn to negotiate with each other and find a compromise. The most difficult thing is if the family has small children who constantly need clothes, toys and developmental courses. It is rather difficult to predict such costs, but it is necessary to include them in the budget, therefore it is recommended to allocate a fairly large amount of money for this item of expenditure.

Another difficulty -adherence to the established budget. Planning personal finances in this case can be a useless activity if you do not accustom your household to the strict implementation of existing agreements. It is much easier to act according to the planned plan alone, but you cannot leave the family alone. For some households, a financial plan may seem difficult enough to complete, and you will have a new task here - you need to clearly describe all its benefits and explain to family members that it is needed in order to improve their existence and allow them to achieve their dreams.