In order to plan for the future, you certainly cannot avoid financial planning. Efforts to achieve life goals by conducting financial planning will make a person more focused and cautious when making decisions. Financial freedom is realized when one creates an orderly financial plan from the start.
The financial situation of a person depends on many factors, e.g. B. whether they are married or not, what the working conditions are like how old they are, the size and situation of their family, their health, their level of education, and others. Well, planning is important to overcome these factors.
Definition of financial planning
Financial planning is the process of a person’s financial planning to achieve more planned life goals. This planning is carried out continuously, taking into account various factors such as income, expenses, total assets, and others.
This financial planning is of course gradual and different for everyone. For example, the phase before marriage is different than after marriage, and so on.
Basically, however, this plan aims to achieve your own goals in life financially. Life becomes happier and more prosperous, with better-organized finances.
Benefits of financial planning
Financial planning is very beneficial for one’s life. These benefits include:
1. Better financial management
Having a plan will help improve your financial situation. This is about how you can manage expenses so that they are proportional to income. It also includes how to plan so that it can contribute to the development of asset ownership in the future.
2. Optimization of sales
There are people who have large incomes, but the economy is so-so. One reason lies in the planning, which did not go well or not at all. The existence of a plan makes a person able to optimize income.
3. Facilitation of investment plans
The benefit of financial planning, which is pretty important, is that it helps someone create an investment plan. If someone knows how to invest, good financial planning can help them a lot.
4. Don’t worry about the future
If someone has planned well, the finances will also be better managed. The result, of course, is reducing the risk of negative things happening to one’s finances. The existence of such planning reduces fears or even you will be content with the financial conditions in the future.
Different types of financial planning
There are several types of financial planning you can use to achieve financial independence, including:
1. Cash flow management
This is a type of financial planning based on the level of income and expenses. Cash flow management lets you manage how you manage your finances, what you can have, what you need to defer, and so on.
2. Risk Management
This planning includes how to identify the risks that will result in loss of income and what the consequences will be for himself, his family, or others.
For example, you need to be able to think about how to cover medical expenses if an accident occurs in your family when you are unemployed. Or how can you survive if you are suddenly laid off?
3. Investment planning
Investment planning can help you make investments that suit him and his financial situation. For example, the planning of the start of the investment, the type of investment to be selected, the investment amount, etc. are included in the financial planning.
4. Tax Planning
This tax planning allows you to find out the effects of taxes on your financial situation. You need to know the latest tax regulations that are directly related to how to better manage your finances.
5. Retirement Planning
Financial planning is also part of retirement planning. Choosing the right pension fund for the family is also part of this type of planning.
6. Estate Planning
Financial management is also part of real estate management. For example, how to manage real estate after retirement. Real estate management is important as a main asset. All of this is part of financial planning.
Personal financial planning can include several of the planning types mentioned above, depending on your life phase and phase. The point is that planning can last continuously for life.
But any good financial planning certainly needs the support of sophisticated digital services using the latest technology.