Regardless of the life stage, carrying out financial planning is essential to achieve some goals, whether professional or personal.
In this sense, building good financial planning is a prerequisite for anyone looking to create an emergency reserve and subsequently start investing.
What is financial planning?
Financial planning is the main tool used by individuals and companies that seek to maintain a higher quality of their finances, without incurring expenses above their income, which can lead to many complications.
In this way, he is a helper for the financial organization , the starting point for achieving the goals set, regardless of whether they are financial or not.
Among these objectives, trips, buying a house or car, being able to study abroad, change professions, among others, stand out.
Therefore, understanding how to carry out financial planning, what its role is and especially how it impacts the daily lives of people and companies is essential if you want to change your life.
What is the role of financial planning?
Seeking to optimize the finances of families and companies, its main focus is the management of all expenses, revenues and, in addition, debts already contracted, always aiming to find the best solutions.
For this reason, controlling finances is like controlling a pendulum, where it is essential to maintain a balance between your expenses and your income, but, far beyond that, to understand what your main needs are.
So, whether to be able to go on a trip or buy a car, or to get out of a delicate situation with suppliers and other creditors, financial planning is fundamental and does not necessarily need to be done alone, the help of a financial planner can be requested.
What about personal financial planning?
Undoubtedly the best known among the types of planning, personal financial planning gained strength with the diffusion of the world of investments by digital influencers in the last decade.
In this way, it serves as a guide, which demonstrates the paths, challenges and ways to overcome difficulties so that it is possible to achieve the objectives defined at the beginning of the planning.
To be able to model a good financial planning, it is essential to follow the following steps:
- Write down all monthly expenses in a notebook or spreadsheet;
- Separate which expenses are fixed and which are variable;
- Understand what debts are, whether loans or credit cards;
- Identify whether or not there are investments in fixed income or variable income .
After these steps, either alone with the help of ready-made spreadsheets or hiring the service of a certified professional, known as a financial planner (it is mandatory to have the CFP certification to act as a planner), it’s time to put everything into practice.
What are the types of financial planning?
In addition to personal financial planning, there are other models, such as:
- Family financial planning;
- Business financial planning.
Regarding family financial planning , there is the involvement of more family members in the process of deciding on objectives, but also in defining which expenses are fixed, which are variable and which are the sources of income.
Because it is a planning that requires cooperation between more people, it becomes more complicated than personal planning, since there are different goals and wishes among family members, even if they are generally the same.
This type of planning helps families to get out of debt and also to identify the causes that led them to get into debt and what are the hidden expenses that consume their income.
On the other hand, in the case of business, unlike what many think, it begins even before opening a company, whether individual or not.
As a company’s revenues and expenses are much more variable than those of a family, strictly following the developed planning becomes crucial for the success of the business.
It is important to remember that most companies cannot remain open for more than 5 years and much of this comes from a lack of financial planning .
How to do financial planning?
Now that you already know what financial planning is, what types are and their role, the time has come to learn how to do financial planning.
The kick to start building financial planning is to write down all your monthly expenses, as well as all income that comes in during the month.
To be more organized, write down the dates on which payments and receipts are received, so that you can build a cash flow closer to reality.
After identifying these points, it is time to define which objectives to achieve, defining whether you will use it for purchases, pay off debts, invest, travel or pay for courses and certifications to evolve in your career.
Then, define what can be cut or not in expenses and, for this, it is necessary to divide expenses into those that are fixed and those that are variable.
Subsequently, it is time to create your emergency reserve, which is a way to anticipate possible unforeseen events that may occur during your journey.
Ideally, this resource should have maximum liquidity, either in a current account or in assets that remunerate and have daily liquidity.
Finally, draw up plans to build a solid heritage, which is possible through investments. Thus, building a good investment portfolio, with fixed income assets, variable income, among others, will be a fundamental step for you to achieve a more peaceful retirement.