Personal Planning

Personal Financial Planning Process is important because it is the key to financial success. At the same time, it is a life-long process or also knows as life-cycle planning which can control one’s financial situation. In fact, a good financial planning can lead to enhancing the quality of life and increasing personal satisfaction by reducing uncertainty about future needs and resources. The findings of this study are useful to personal finance as it could analyze the process for making financial decisions thus, leads one’s to develop his or her personal financial goals. Apart from that, it could assess personal and economic factors that influence personal financial planning. Besides, it helps one’s to determine personal and financial opportunity costs associated with personal financial decisions. With personal financial planning process, one’s manage to identify strategies for achieving personal financial goals for different life situation.

Personal financial planning involves the following process such as determine your current financial situation, develop financial goals, identify alternatives courses of action, evaluate alternatives, create and implement a financial action plan and reevaluate and revise the financial plan. In order to develop personal financial goals, the financial goals itself should be realistic, be stated in specific, measurable terms, have time frame and indicate the type of action to be taken. Essentially, the financial decisions are affected by a person’s life situation in term of income, age, household, size, situation and personal values. Economic factors also affected in term of prices, interest, rates and employment opportunities.

In addition, every decision involves a trade-off with things given up. Personal opportunity costs include time, effort and health. Financial opportunity costs are based on the time value of money. Future value and present value calculations enable one’s to measure the increased value or lost interest that results from a saving, investing, borrowing or purchasing decision.. Therefore, successful financial planning requires specific goals combined with spending, saving, investing and borrowing strategies based on your personal situation and various social and economic factors.

The first step of proper personal financial planning process is one’s able to determine the current financial situation with regard to income, savings, living expenses and debts balances. Preparing a list of current assets and debt balances and amounts spent for various items gives one’s a foundation for financial planning activities. The personal financial statement will provide the information that needed in order to match the goals with one’s current income and potential earning power.

The second step of personal planning process is to develop financial goals. One’s should periodically analyze his or her