Understand 8 Fundamental Components of your Personal Finance Planning

And start on the journey of your life fulfillment.

How you could change your financial look at your life, using these 8 fundamental elements of your personal financial planning

If I ever did one thing differently if I go back in time, it would be, “I would have loved to have someone teach me the importance of finance and personal financial planning and its benefits in my life”. This is not at all from the signs of any regret. I truly feel I had learned enough about finances way past in my life. Fortunately, I started on it a few years ago and have made good progress about my financial planning and continuing to work on it.

Where to start is always a struggle, for many out there. But I thought I could give a little help through this article about where you can start, how you could go about it, and what are the elements that you need to think about.

Whatever juncture of life you are in — Single, yet to be married. Just married. Have one child. Have more than one child. Divorced. Thinking of doing your own business while you are in a full-time job and so on.

You could always start with one thing. Talk to a financial expert who can understand your current financial position and condition, guide you through what you could do, to move towards your goals financially. Now, I know, many people out there hesitate to reach out to a financial expert or guide, just because, they have this notion that, financial experts or guides only sell their products. Well, that may be true to some good extent. That’s where you need to identify a genuine financial guide who would help you with the good and right information than just selling products. Maybe, reading this article might enable you to understand a few things which can become home work for you, before you talk to a financial expert. Let’s get right into it.

I am sharing from my experiences about 8 fundamental elements of personal financial planning. One needs to think of these elements before they talk to a financial expert or a guide, to be able to arrive at good financial planning for themselves. While a few of these can be reviewed or addressed in parallel, I recommend acting on them in a sequential way to make your financial planning better.

Financial Planning is like navigation. If you know where you are and where you want to go, navigation is not such a great problem. It’s when you dont know the two points that its difficult

Venita VanCaspel

You Income Sources

Most of the people who are employed, think of the only salary as their income. In a way, many people in the world are conditioned to think like that. But ideally speaking, one can make or create many channels as their income sources based on their skills, expertise, time, effort, aspirations, and so on. No one could stop you if you wanted to create those additional channels of income sources based on your abilities and capabilities. The basic idea is that, if our cumulative income is greater than our expenses + liabilities, then it means that we can make our financial planning better. If one’s earning is just enough to address or even a little less to address expenses, and liabilities, it means that they are still in the struggling mode in finance terms. Either they need to cut down expenses or get rid of liabilities before they improved their cash flow.

Your Expenses and liabilities

The foremost that you need to consider is this — to make your living meaningful by providing yourself (and your family) what you/they need. All kinds of expenses need to be considered — your food, shopping, entertainment, internet, electricity, domestic help, maintenance if you are living in an apartment, travel and there are many more that you can think of. Your liabilities also need to be considered. If you have any outstanding loans, you need to consider paying off those in installments. (I would recommend reading about budgeting here — )

Your Medical/Health Insurance

With medical expenses ever increasing across the globe, it is wise to have health insurance in place. For most salaried people, organizations/companies provide less costing insurance plans as part of employee care programs, covering employees and their dependencies. But if you are self-employed, you should have this in place so you don’t end up spending hard-earned money on medical expenses which otherwise could go to other elements of your financial planning which we are reviewing here.

Your Life Insurance

Of course, many people in the world (including me once upon a time) think that we would live forever, and nothing would happen to us. I had to make a conscious/wise decision to have my life insurance in place, not because I have lost faith but I am considering the possibility that anything could happen to me at any point in time. So, if you do not have life insurance, you must consider taking one to ensure, dependencies covered for their lives and livelihood (if you are not around). It is the most significant component after your expenses, liabilities, and health insurance. Again, if you are a salaried person, most companies are covering it for employees through employee care programs. If you are self-employed, you should consider having one for sure.

Your Emergency Fund

While this may feel like a stretch for many, wise people build this emergency fund and keep it readily available in a liquid state. It does not mean that it stays in your savings account, earning less interest, and losing value with inflation. You could consider other avenues. It’s always good to have this emergency fund available even if you are in a job as it would become helpful to sustain your living quality for unforeseen conditions like losing jobs or losing revenues. If you are a salaried person or not, you might consider saving somewhere from 6 months to 12 months under this category.

Saving for Your Children

As parents, we need to cover the minimum for our children. Baed on culture, it means things like their education and marriage. In some cultures, marriage is taken care of by individuals. Working on more for our children depends on parents’ capability and capacity. One caution for attention is that everyone should live their life vs. doing things that overwhelm them from a finance standpoint. It applies to parents as well.

Savings towards Your Retirement

Retired living is becoming a very challenging area across all regions in the world unless we plan it with much care. India offers Provident Fund, the USA offers 401K plan and many other countries may be offering such retirement savings plans that you may want to consider before you look for avenues for savings towards your retirement savings. The idea is, the return interest rate should be good enough, possibly tax-free, and beat inflation. A quick tidbit for you here. If you are an energetic person, looking forward to living longer, and at the same time have skills to earn money post your retirement, then you are better off overall. If you are a person who wants to rest more in your retirement life, you may better review your retirement saving and be very clear about it to see if you are saving enough and be able to lead a meaningful livelihood.

Your Wealth building

After all the above is taken care of, one could think of building wealth, for many reasons as possible. For personal needs (like living on an island in the late years of life, e.g.) or any other needs that one may have including philanthropic activities. People who thrive to get to this state, always do well for their entire life with respect to finance. It’s all about how well you are seeing the future for yourself, what are your dreams, how would you like to live your entire life, etc.,

Final Thoughts:

Starting on your financial goals is very important. It is a stepping stone towards a liberating life. Without addressing the financial component of our lives, it might get difficult to focus on other components of our lives.

So, what are you waiting for? Have you identified your financial expert/guide and called for an appointment?