From Evernote: |
Personal Financial Planning |
I was fortunate to attend Coffee Talk yesterday at Social Hall B of One Serendra. The COFFEE TALK is one of BPI's Preferred Banking Enrichment Series wherein financial management professionals from BPI Asset Management Group shares and enriches its clients understanding of the latest economic and business trends. As expected, the coffee talk also included presentation of different investment options that caters to various individuals depending on each investment horizon and risk appetite.
Personal Financial Planning
The talk presented a simple definition of personal financial planning through four simple steps
- Determining what you have
- Knowing what you want
- Finding out how much you need
- Making a plan to achieve what you want
The four simple steps are very clear. The statements are also simple that everyone can understand and relate to.
Determining What You Have
This process involves making a personal listing of income and expenses and assets and liabilities. A simple inventory taking of sources of income and list of expenses. The difference between income and spending is the money available for investment. For an employee, income is the bi-monthly salary and expenses are money spent for food, rent, telephone bills and other expense. The excess of income against expenses is the money left that can go to savings or investment.
Listing of assets and liabilities can be accomplished by writing down your current cash, savings in the bank and other investments as part of assets. Liabilities on the other hand pertain to credit card dues, money you borrowed from your friend and other payables. Cars and Homes are assets too but they may also be liability. For simplicity, i don't list down cars and homes as assets since they don't generate cash fast.
After doing the exercise, this should give you your financial standing.
Knowing What You Want
This step is knowing what you want to do with your life and future activities. Taking a long vacation in Europe can be one. Enrolling your children to a well known and reputable university is also a goal. For me, buying my own house and lot. There are many goals to choose from but may I suggest to limit it to five goals and write the down.
Finding out How Much You Need
The third step is putting value in your goals. How much money will you need for that vacation, for the tuition fees and that house and lot.
Making a Plan (& executing it) to Achieve What You Want
Knowing what you want, then how much you'll need plus your current financial status will tell you where you stand at this point. Your savings/investments might not be enough thus you have to make a plan how to get that money you need by the time you want to have your goal.
Summary
Financial Planning seems easy but it is tough. Tough but doable.
For starters, i suggest tackling that income and expenses list then your assets and liabilities statement. You have to know first your standing before moving forward.
