Financial planning is a comprehensive guide to manage your finances in order to achieve your financial goals. This process takes into consideration an individual’s current net worth, savings, cash flows, debt, and long-term goals. Only having a single approach is not suitable for effective financial planning. It consists of several factors like your current earnings, savings, loans, etc. that can affect the way of deciding your financial future. Now we will discuss some financial plans that will decide your success or failure.
Success
- Have a complete financial objectives and goals
The goals and objects will be the map to your financial plan and should provide a guide for the financial future. The targets and agenda should include features such as:
a) Quantifiable and achievable,
b) Clear timeframe,
c) Separation of your needs and wants.
These three features should be agreed and green-signaled with your financial advisor who will assist your measure progress. They should be checked periodically to capture changing circumstances and to ensure they remain relevant. - Analysing your financial and personal data
The four ratios such as solvency ratio, savings ratio, liquidity ratio and debt service ratio are produced to develop your understanding of your financial circumstances and to pinpoint areas of strength and weakness. Your attitude, tolerance, and capacity for risk are assessed using a psychrometric designed risk in relation to investment assets. This process is used to access your asset allocation for investment or personal goals.
Failure
- The habit of delaying
The habit of postponement is the first biggest step for your financial failure. Majority of people tend to delay beginning to save. As there’s a famous saying “Tomorrow never comes” , the time to start saving early comes to an end. To build wealth, a gradual process is to start saving at the earliest. An easy factor here is, if inflation is climbing exponentially year after year, so does the return of investments. The key is to start before the clock starts and make advantageous use of time. As soon as you make a financial plan, start saving at the earliest. - Ignorance
The only person who is immune to financial plan failure is someone who has unlimited wealth. This is because such a person does not try at all. If you stay ignorant, it will push you amidst the crowd where you won’t have any clue about anything better than the rest. If you have a financial fear, do not ignore them. Fearing is the biggest failure in financial planning. Therefore, you should address those failures to your financial planner. They might help you to clear your fear and assist you in attaining your financial goals as according to the plan.
However, it is really important to check this four factors that will determine whether your future financial plan is a success or failure.
