Personal financial planning is essential in today’s complex economic environment. Creating a personal budget, creating a saving plan and account, setting up tax planning, and addressing debts through the establishment of a debt management plan are important steps. There are often many factors that are difficult to control and having a watchful eye on your finances will help you to be better able to avoid hardships. Financial planning is empowering.
Collect and organize all personal family data. This includes information on children and other dependents (for example, if an older family member resides with you their data would be relevant).
Develop a family list of goals and objectives and include input from all family members. For instance, if a child has their heart set on going to camp each year, then the cost of this expense should be included.
Notate those issues with the potential to be problematic. For example, the cost of schooling may be a future factor. Perhaps your house is on a balloon mortgage and the monthly payments will eventually rise.
Create a balance sheet that includes all income, assets, and debts. Do not leave anything out no matter how minor. For example, you may have a one-time payment for a minor bill you incurred. Do not omit it thinking you will pay it with the next check, and it will no longer be a problem. List it then cross it out when it is paid. There are few things more satisfying than crossing off a debt! Too, you may forget it and find it is sent to a bill collector where it negatively impacts your credit score.
Create a tentative cash management plan. It does not have to be permanent. Revisit the entire financial plan monthly to ensure you are staying on track. Make it a family event so you are training your children to be excellent money managers.
Address investments, special needs, and estate planning when you are confident your personal financial plan is working well, and you are pleased with your money management habits.