Financial planning and 3 important points.

Hello all, Financial Planning is very much important in today’s world and this blog is all about spreading the awareness about it. Before going to the main subject I would like to tell you what means financial planning? So what is financial planning and why this is important in everybody’s life. In layman language, financial planning is a technique of creating process to determine how much to be saved and how much to be spent with respect the earnings to reach the goal.  

Why it is so important?

So we all know that to become successful in any task one should have the planning to achieve the success in that task like wise to achieve the financial goal one should have the planning of it. I personal believe planning our finance plays a vital role in everyone’s financial life.If someone does not know how much he is earning and how much he has to save or spend he will never achieve the goal of financial freedom. And that is why one should strictly make own financial plan for their earnings, savings and expenses and this includes monthly as well as yearly.

So how to do Financial Planning ?

1. First and foremost one must know his earnings and his capacity to earn: What does mean by earning and capacity to earn? So it is simply whatever you are earning currently by job or business is called as earnings (I am considering the legally allowed). Capacity to earn means you’re potential to earn more than current earnings by adding extra efforts legally. We will see later the different methods to earn which includes active income as well as passive income.  
2. Second is knowing your Savings: Savings are very much important in everyone’s life. Savings consist of all those expenses which are useful for present and future expenses. Let’s say savings for Medical expenses of family, for children’s education or marriage etc. These are the major expenses in everyone’s life. Savings can be done in various ways which we shall discuss later in the same blog.
3. Knowing your current Expenses: There are two main types of expenses i.e. compulsory expenses or useful expenses and unnecessary expenses in layman language we say useless expenses. All those expenses which are necessary in our daily life like paying tuition fees of child, purchase of groceries, medical expenses, paying premium of insurances etc. are useful and compulsory now days. However there are some expenses we may do unnecessarily like not useful subscriptions for example say if somebody liked a mobile application or a software he/she will subscribe it without thinking if it is useful for he/she and for how much time. They will subscribe it without considering the time period for which they are going to use it. Instead of that they can give a try for it and if liked they can extend the same. This will save a lot of money.

If someone identified the above mentioned parameters then it is very much simple for him/her to make financial planning and it will be easier to achieve the set financial goals in life. Also one more important point is that implementing the plan. If some body simply made a financial plan but no action taken by him/her then it is simply waste of time as well as money. It is as good as no financial plan. For this reason one should always focus on being on track to follow the plan. In upcoming blogs we shall discuss various methods of earnings like active and passive, different methods of savings and controlling / reducing the unnecessary expenses.