12 Steps To Simplify Financial planning In 2023
Right off the bat, money matters are always hectic, be it for a millionaire or a commoner like us. No matter how much wealth you possess, you will always end up spending haywire if there’s no chalked-out investment and expenditure plan for the same.
It’s a no-brainer that planning for a proper strategy seems like Shakespeare’s work, financial planning seems like writing a complex sentence.
Well, that’s not true! With that said, financing is the only way that can help you tackle from a lump sum to even small bits of cash a tad bit easier. For the record, there are no alternatives to start financing today.
What is financial planning?
To put it simply, financial planning can be best described as how you plan to save money step-by-step in order to fulfill a requirement over a period of time.
For starters, it may include investing your money in the right places, and saving up bit by bit – day by day. Also, this includes paying your EMIs on time, and everything else related to a hefty purchase.
Financial planning should seem like a blueprint that will help you plan your foundation and make it sustainable in the long run. No matter where you are standing in your career at this very moment, it is crucial to have a mindset.
Owing to that, your goal helps financial planning a walk in the park. To sum it all up, Financial planning is by far the optimum way to plan money matters and sail through the turbulent sea of losses and gains smoothly, safely, and sound.
For instance, say you want to buy a property with all the luxuries that you have ever dreamt of! Let’s say the property comes with a hefty price tag of a million. It may not seem much for millionaires, but for the common masses like us, it’s worth a fortune.
There is no possible way we pay a million for the property in one shot. Now, this is where financial planning comes into play. If we can plan this money throughout the course of say 10 years, it will be a lot more practical and easily assessable for us. And with this mindset, you can surely buy the house of your dreams.
How many types of financing are there?
For the record, there are a plethora of categories and subcategories of finance. However, they can be broadly classified into 4 main types-
Public finance
Consider public finance as the budgeting, calculating taxes, state-driven funding, and loan rendering. Also, it takes undertakes Regular funding which is secured mostly through taxation.
We know that public expenses are large-scale money management. It includes everything: expenditure, debt, and savings that are granted to the state.
In other words, public expenditures include all the extra services that are provided to the citizens of a state or a country, that are managed by the government treasury. Now, debts include all the large-scale debts that the state may have taken to induce work or to meet the expenses of an upcoming industry.
Lastly, there are public savings. It oversees the savings available in the form of a considerable amount of money. Such savings are required to tackle emergency situations that put the state in crisis. It’s a no-brainer that these complex plannings and executions are done by experts to avoid even the smallest of mistakes that can lead to a huge fluctuation in the net data.
Corporate finance
In layman’s terms, corporate finance is the expenses and budgeting of a corporate sector. Corporate needs and requirements call for financial planning to a greater extent.
Be it the salaries of the employees, income tax, other taxes, and everything else in between, all need the same amount of attention for proper planning and execution.
Personal or Private planning
Well, this might not be a large-scale affair, but personal financial planning is equally important. To break it down for you, personal finance relates to all expenses that yield in a household. It includes your child’s college and tuition fees, electricity and water bills, and every other private necessity.
Furthermore, It can be divided into Festival finance (The funds that you keep in handy for the upcoming festive season), Wedding finance ( Weddings are a one-time celebration that requires a lot of funds and planning.
A budget wedding can also cost you worth a ton. So, planning this finance in advance is the work of a wise person) and emergency funds ( emergency funds are the most crucial of the above-mentioned ones.
Often, most of us invest in properties and houses clearing out our bank accounts. An emergency fund must be planned and kept aside for any misfortune that, God forbid, may bounce upon.) Even luxuries may need to be planned beforehand to enjoy them the most without any second thoughts in the future.
Debt planning
If you are planning to take a loan to serve a specific purpose, always consider mapping every nook and corner of the situation. Your planning must include the rate of interest, time period, and other factors.
If you are already In debt, consider planning out how fast you can save and meet the debts in order to get a sigh of relief. Always remember that a debt-free life is an asset!
With that said, let’s take you through a tour of the 12 ways to simplify financing-
12 steps to start simplifying finance planning
Always keep an eye on your income and expenditure ratio
Keeping a journal is a great way to keep track of how your expenses are in place. Pen down every little money you spend and earn, and see how it is affecting your savings goal. For starters, you can even set a boundary of an amount that you will not cross weekly, or maybe monthly in order to avoid over-spending.
There are a ton of free mobile apps that can help you chalk out everything in detail. You just need to make a habit of updating them as you go through the day. Alternatively, maintaining an excel sheet will also do the trick. Give it a shot, and you will see the results in no time.
The 70-30 plan
Savings is the mission here. But how you plan it is what makes a difference in the end. Many of us opt for an aggressive plan in the beginning. It is impractical and cannot be practiced in reality, as it is not sustainable in the long run.
With that said, the most reliable and sustainable form of saving is the 70/30 plan. In this, save 30% of your earnings first, and then spend the rest 70% as you want.
To make things even easier and more practical, divide the 70% into many other subs as per your requirements. This way you will be able to save as soon as you get paid. Also, you can alter the ratio to 60-40 or even 50-50 as you progress further.
Set your focus
It is a human instinct to have a lot of dreams. As true as this is, we can not achieve them all at once. So, set your focus and chalk out a priority list. Once done, do not disperse your focus on multiple goals as it will delay the completion process.
Set your priorities straight and then work accordingly. Focus on not more than one long-term and maybe one short-term goal at a time and see the difference.
Give up on unnecessary debit and credit cards
Why consider owning multiple cards in your wallet when 1 (at most 2) is more than enough? Mostly, one debit and one credit card will do the job. More credit cards mean more annual fee coverages you need to bear, which is a considerable loss of money. Instead, opt for one credit and try to use it in unavoidable circumstances. For the most part, use a debit card.
Let go of quarterly and annual subscriptions
Honestly, 6-month or yearly subscriptions may seem like a lot of savings, they are just scams. It is yet another way of tricking you so that they can make more money. Even if we hardly use them, we never fail to grab a subscription.
Get rid of the ones that serve you no purpose whatsoever other than draining extra money. Cancelling your gym membership, Netflix subscriptions, or any membership. Remember that letting go is an art, and you have to be the artist here.
Consolidate multiple bank accounts
Keeping many bank accounts may seem like a wise choice, but it only adds up to fewer annual interests. When you concentrate them in one, you will see less tax, fewer fees, and in turn, more savings. It also helps you keep a good track of the money kept in one account.
Clear the debts
Debts are like a hanging sword to our neck. It may be a good idea to take a debt in time of need, but it will keep us pricking like a nail for as long as we do not pay it back. So, the mission here is to clear the debts as fast as possible without suffering any penalties.
Look for loans that have a low rate of interest in the first place. We recommend you always seek an organization or a loan rendering firm that is ethical and legal.
Use cash more often
Using cash has gone out of fashion as you may think. With the spring of all the online payment apps and their easy accessibility, even small mere shops now have QR codes to accept online payments and retain customers.
Truth be told, these online transactions always have a mere extra cost that is mostly hidden or as low as .2% that we often do not care about. This magnifies over time and is a good source of income for the providers.
Always remember, the easier things get, the heavier the price you pay later. It doesn’t seem much but can turn out to be disastrous over time. So, go old school and use cash wherever possible.
Automate your savings:
Speaking of 2022, it is possible to make a part of your salary go directly into your savings account as soon as you get paid. For this, turn to your service provider and speak your way through it as to how much you want to save.
They will help you out for the most part, and over time, you will realize that it’s the most convenient thing you have done to achieve your goals.
Permanently terminate all old and unused accounts
If you are into business or investments, you might have a lot of accounts. In most cases, it is found that 4-5 accounts are of no use. Without you noticing, you are bearing fees for no reason.
So, look out for previous accounts that you do not use anymore, and terminate them ASAP.
Consider a side hustle
If you want to go a step further and want to achieve your goal a little earlier, consider taking up a side hustle. Polish up any of your skills further and you can take up some work against it.
You can even start working overtime in your own office or you can begin your own freelancing journey. Nowadays, even big names like Amazon are looking for remote workers on a part-time basis, you get the drill!
Start investing:
You must be wondering about investing involving all sorts of risks. But, when the stakes are high, the chances of you hitting the top are high. Start investing in the stock market and maybe you can even go for some bitcoins.
This may only work when you are starting to plan this out as a long-term goal. For starters, the investment needs to toil a bit in the market before you can start making money out of it. So, the best is for you to gain some knowledge before investing which can help you minimize the risk by a lot.
Wrap Up
So, you can see that financial planning is just an integral part that you can not look down upon. You may earn pretty well, but if you do not consider planning the finance, nothing will work in your favour in the long run. With that in mind, start your financial planning journey today!
