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Let me begin with the quote that “By failing to plan, you are planning to fail“.

The fact that every step made in a particular direction does not just come out of the blues, cannot be overemphasized. Hence, the need to write out the vision and make it plain. Just like one prepares daily to step out and ensure that all one intends to achieve in the day is achievable, one also needs to plan how one’s funds and finances are spent.

Financial planning entails evaluating one’s current financial situation, setting short-term and/or long-term goals as well as strategies to be employed in achieving these goals. It goes beyond just planning to be rich or wealthy in the future without knowing how to get to that point.

To kick off financial planning, you need to first, be aware of where your money currently stands i.e., one’s current net worth. A simple formula for calculating net worth is

Assets – Liabilities = Net worth

Asset: everything you own (cars, houses, invested money, cash in the account, etc.)

Liabilities: everything you owe (debts, loans, mortgages, etc.)

Then, you have a lot of things you want to do soon or over a while, but wait, where will the money come from? What are your sources of cash inflow and outflow? You need to know that too. First, ascertain what you spend your money on monthly, then you know what is remaining for savings and investments.

Now that you know how much you have, proceed to write out things you intend to achieve according to priority. These things could range from asset acquisitions to funds generation for projects to education for children to even vacations and leisure to retirement. If planning on your own, your project might not be properly prioritized, hence the need to talk to an expert financial planner or advisor. However, your priorities are ultimately at your discretion.

Here are some reasons why you should make plans for your finances;

1. Better financial understanding is achievable when measurable financial goals are set, the effects of decisions understood, and results reviewed.
2. It helps reduce the uncertainties which can hinder the growth of an individual or company. These further helps in ensuring stability and profitability in concern.
3. An essential part of the financial planning process is providing for your family’s financial security. With the right insurance coverage and policies in place, you have peace of mind for yourself and your loved ones.
4. Financial Planning reduces uncertainties of change in market trends which can easily be faced through enough funds.
5. Financial planning makes it possible to manage income more effectively. Managing your income gives you an understanding of how much money you will need for tax or loan (re)payments, other monthly expenditures, and savings.
6. Through financial planning, a reasonable balance is ensured between outflow and inflow of funds so that stability is maintained.
7. Your cash flow can only increase by carefully monitoring your expenses and patterns of spending. Tax planning, prudent spending, and careful budgeting will help keep more of your hard-earned cash in your pocket.