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Agree with Noman!
A financial plan is also called Business plan. The major contents are business strategy and the list of target customers, regions and jurisdiction in the pipeline, the estimated business turn over (sales), the projected operating and marketing expenses, net revenues and future business expansion plans.
1. Identify your current financial situation. Collect all information about your sources of income, debts, assets, liabilities etc. You would have a clear idea of your current financial situation and you could then study it.
2. Identify your targets. Write down your current and future goals. Also take financial goals of your family members into consideration. Prioritize each goal marking its importance and its period time. Quantify your each goal. Once you do this, you will clearly distinguish your short term and long term goals.
3. Identify gaps between current situation and target situation. Once you come up with above two steps, you will have clear idea of shortfall. This is important because this step will help you to identify right investment at right place to generate required money on required time.
4. Prepare personal financial plan. Once you have bulls eye on your financial gaps, you need to review various investment options like stocks, equity, mutual funds, fixed deposits, debt instrument like bond and debenture etc. Identify best combination of all these which best suitable to you.
5. Implement your plan. It’s time to put things into action. Gather all necessary document, open all necessary accounts like bank, demat, broking account. Start investing and most important stick to your plan.
6. Review your plan periodically. Financial planning is not one time activity. A successful plan need periodic review like once in six month or once in year.
You know the importance of a financial plan, figuring out exactly when you’ll do what you want to do is the next step and that is: make a financial plan. The actual financial plan will help you in knowing how you’ll achieve your goals.
Writing a financial plan does not make it compulsory for you to be a mathematician, but you need to know how the numbers affect a business. Anyone can put together a great financial plan. A financial plan is simply a budget put together to reflect your goals, new income and time.
How to write a financial plan?
You can be as creative and innovative as you want as long as you are succeeding in accomplishing the following goals. Be as creative as you want, as no two plans look alike. Go through the following points on making a financial plan:
a) Set a time frame
State clearly where you want to be after five, ten or thirty years? Establish how you want how your financial life will look like at these points.
b) Plot your income:
Your job may not be your only means of income. A side business or making money online are options for extra income. An income statement is one of the three parts that make a financial plan. The income statement expresses your revenue and expenses, providing you a clear financial picture.
c) Monitoring cash flow
Preparing a cash-flow estimation allows you to monitor the flowing in and out of cash, thus allowing you to prepare for a surplus or a loss. The best way is to include two columns for each month of operation. Research into necessary costs and don’t forget your life insurance, health insurance, car insurance, etc.
c) A balance sheet.
The balance sheet in a financial plan is very important as it balances the assets and fixed assets against all the liabilities. The balance sheet helps to measure the financial health of a business, as it projects its net worth.
d) Luxury costs
Think about on what kind of money you’ll need to live the lifestyle you want. Expensive cars, nice house, education can be considered a luxury cost.
e) Investments
Investments are a great way to counteract against inflation. Invest in stocks, mutual funds, bonds, real estate, gold, collections, whatever suits you. But make sure you know what you’re doing. It’s wise to not to put all of your eggs in one basket. Your financial security should become more and more important as you age.
It’s always better to go with the conservative approach when writing a financial plan. People get tempted to paint too much of a rosy picture. Don’t get too fancy when you are preparing your financial plan. One can always use Standardized Financial Sheets. Decide upon an appropriate Accounting Method. Remember to follow one method for all of your accounts, to make things easier later on.
very wisely with detail look in to past and future and resources available.
> Collect information of income sources, dept, assets, liabilities.
> Write down and Identify your targets, currents and future goals.
> Once you come up with above two steps, you will have clear idea of shortfall. This is important because this step will help you to identify right investment at right place to generate required money on required time.
> Prepare personal financial plan.
> Implement your plan. It’s time to put things into action. Gather all necessary document, open all necessary accounts like bank, demat, broking account. Start investing and most important stick to your plan.
> Review your plan periodically. Financial planning is not one time activity. A successful plan need periodic review like once in six month or once in year.
A fainancial plan is part of the business plan. It simply lists the following on a time line (usually monthly):
Investments (if any).
Anticipated revenue based on your sales forecast.
Anticiapted expenses based on your operations plan.
Required funding (where expences (+ investments) are higher than revenue.
Some consider cost and profitability accounting as part of the fainancial plan.
