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The importance of financial planning

Posted by tmmaria on April 27th, 2019

Financial planning is crucial in the management of economic resources. Because through it, the different strategies to achieve the stated objectives can be based.

However, this is one of the least implemented elements in money management. This for two basic reasons:

  • The absence of a culture of financial education at an early age.
  • Learning based on experience

And all this because it does not print the degree of relevance it requires, but most people learn on the basis of trial and error, with a high proportion of errors that, in general, go well costly.

It is for this reason that we are interested in addressing the issue of the importance of financial planning for decision making. In order to identify the way in which it has a positive impact on the different actions taken to materialize the goals that have been proposed, both at a personal and business level.

What is financial planning?

The financial planning is an ongoing process or continuous attending the person in making wise decisions about money, which can help you achieve your goals in life

This definition is particular; because it raises how financial planning is not something of a day or two, but suggests a process, where decision making is being shaped; and that this shaping serves as a bridge to reach the goals in life.

In that sense, there are two elements that raise relevance in this topic and that are linked sequentially:

  • Sensible decisions
  • Goals of life.

This means that to the extent that the person makes sound decisions will achieve their life goals. And this is the result of good planning. Therefore, by including the planning factor in the entire context of the decisions and the goals or objectives of life is synonymous with success, since they have achieved what they have worked for.

Importance of financial planning in decision making

Taking all the above as a basis, the importance of financial planning lies in that it allows the person to have a road map that marks the path that the money will have within the financial management. To get success in the business, you should hire a financial advisor. Here you can get the best financial advisor Anaheim CA.

Steps to establish good financial planning

Step No. 1: Define your objectives

Without defined objectives the efforts to have a good money management are in vain. Therefore, it is necessary to establish what these things are to be achieved and that this is the basis for financial planning.

Step No. 2: Evaluate your current financial reality

After having a clear idea of ​​where you are going (objectives) you need to be aware of what account and what you need. To do this, people are invited to make an assessment of what their financial reality is.

This is to know:

  • How much do you have available in goods or in cash and securities?
  • How is it distributed, if any, your debt structure?
  • What are the fixed commitments?

The answers to these three questions will allow you to have an overview of your current economic situation and the best way to solve it.

Step No. 3: Establish an action plan and strategy

The third step represents the financial model. It is the moment in which you have to establish a roadmap of what you want to achieve and how it is going to be carried out.

It is important to highlight that this step is decisive because here we summarize everything that is going to be done to reach the stated goal; therefore, as far as possible, it must be specific and detailed in both the plan and the strategy to be used.

Step No. 4: Execute the plan

The most important thing in all the raised thing is the execution of the plan. The way in which what was planned is realized, and at this stage is that, in general, people tend to faint, because initially there is a lot of energy and this goes hand in hand with the natural impetus to achieve their goal.

However, the key to all this is the adherence to the plan to the letter and the discipline to maintain its course.

To all this, planning is not an immovable straitjacket. On the contrary, the objectives are the principle that sets the pattern for the adjustments that are going to be made. That is, to the extent that they are achieved then the plan is going from strength to strength, otherwise it is necessary to identify which aspects should be modified to obtain success.

Also See: Financial Planning, Money Management, Financial Reality, Financial Advisor, Planning, Financial, Objectives

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