Making a workable and feasible plan for your finance is the most crucial form of planning among all. A plan can be made for near future, for next few years, say 5 years, or may be for a longer period of time or can also cover up your entire life. Well, it is a general notion that a plan is considered to be good only when through it you are able to secure yourself and your family, till your last breadth and even beyond it. Just like individuals differ from each other, so does their financial needs. The biggest mistake we often is by copying some body else’s financial needs and plan. So, let us take a gist of what a successful plan should consist of and how to make that plan.
Step 1: Identify your short and long term financial needs. Short term needs may include your daily expenses or even non-recurring expenses you expect in your near future. Long term needs may range from buying a new house, car or other assets, paying for your child’s education, wedding expenses of your little angel, post retirement expenses. The list is long enough to be defined.
Step 2: List out your expected sources of financial inflows and make an estimate of the amount as well. I will suggest you to follow a conservative approach while making an estimate of the inflows.
Step 3: Make a scope for contingencies in your plan, for you never know when they will knock your door.
Step 4: Plan your investments for a short period of time
Step 5: Make a conclusive plan for a longer period. A good plan should have an inbuilt scope for changes. In other words, your overall packet of investments should maintain a balance between liquidity and profitability. This perfect mix of your investments depends on your capability to invest and also on risk appetite.
Step 6: Check and re-check your plan for any discrepancies. Make changes, if necessary.
Precautions while making and implementing plan
1) Don’t have a deep love for your plan. Be flexible in your approach. If on the way of implementing your plan, you sense it out as unsatisfactory, don’t hesitate to make changes in it.
2) Don’t expect cent percent accuracy from your plan.
3) Before making any financial commitment, think thrice not twice. Critically analyze the pros and cons of all the options in hand.
4) A plan is not a magic which can change your world. Be realistic with your plan and keep a tight hold of your roots on the ground.
5) Be aware that a plan may turn the outcomes other way round. I know a person who got married and as a prudent person, he made certain investments in advance so that whenever his baby will arrive in this world, he will be able to handle the expenses without any hassles. But unfortunately, he got this news wrapped in a shocking envelope. His wife was expecting with triplets. And his whole plan of delivery expenses, child’s education and everything else went wrong. He finally found himself in a debt of many lakhs.
Most importantly, always remember that a mere plan is not going to benefit you at all. In order to reap the benefits, you need to implement it with same zeal and caution with which you have made a plan.
Wish you all luck for your financial plans to be successful and fruitful.
