Everyone has goals in their life to achieve which are unique to them as individuals. You may want to own a big car, or buy a new house, or experience a world trip, or provide for your child’s education, or create enough corpus for a comfortable retirement. Your goals can be a blend of short-term, mid-term and long-term goals. These goals act as the foundation in determining the amount needed to invest to accomplish your desired goals. To achieve your goals, it’s important to have a good financial plan in place.
A financial plan is a roadmap to achieve one’s goals. Following is a step-by-step process to create a good financial plan:
- Determine your current financial condition
Theprimary step for making a good financial plan is determining your financial condition concerning your living expenses, savings, income levels, and debts. Make a list of your assets and debts and assess your financial situation. Evaluating your financial situation will aid you torealise how much you need to invest in the available investment options.
- Develop your financial goals
Themain objective of establishing your financial goal is to lay the foundation of financial planning. Most people just save and invest money without any particular goal in mind. Hence, the next step is to define your goals that include writing down or formalising your goals, adding respective costs to them and determining the time period toachieve these goals.
Only when you set your goals, analyse them and agreethat you are willing to make the financial commitment required, you move an inch closer to your goals.
- Convert your financial goals into a financial plan
The next step is to develop an action plan to attain your financial goals. A good plan entails a controlled and informed budget, controls your investment strategy and mirrors your personal goals. This step further involves three sub-steps, which are:
- Linki your existing assets with your financial goals
- Link your present and future savings to your goals
- Create alternatives – Develop an alternative, which is crucial for making a sound financial plan.
- Evaluate your alternatives
Once you have enlisted your final goal strategy, the next step is to scout for the right securities for each goal. However, to make that decision, you must be acquainted with different types of investments available to you:
- Corporate debt
- Gold, etc.
- Real estate
- Small savings scheme
An investor must choose the securities based on the following factors:
- Their risk appetite
- Pros and cons of each asset
- Risk of each asset under consideration
- Create and implement your plan
Thefinal step in creating a financial plan is implementing your plan. If you have reached till here, then be assured that most of the difficult work is behind you. In this step, you have to draft an action plan. Your action plan must include all the tasks that you need to accomplish to improve your financial condition.
To implement a financial plan, you can consider relying on the expertise of specialists such as tax professionals, insurance agents, mutual fund/stock distributors, financial advisor etc. Happy investing!