Personal financial planning The stability of the personal status of individuals and families is closely related to the stability of their financial condition. Financial conditions are related to advance planning. Sound financial planning is an indispensable condition if one wants to stave off economic troubles and to constantly improve his condition up to a safe and comfortable retirement age.

Where does personal financial planning begin?

What are its ingredients? And to what should lead?

what can affect your personal financial planning

personal financial planning template

How to teach your young children financial responsibility?

Where does personal financial planning begin?

Personal financial planning mindset type.

? The poor mindset, which is the mindset of people, no matter how much money they earn, they remain poor, because all the cash flows gained go to expenses, not to assets. Their emotional nature dominates their purchases and expenses, so they buy things they really don’t need. No matter how little the price of these things is, their accumulation leads to a waste of large sums.

The middle mindset, which is the mentality of those who aspire to become in the wealthy class, but their financial flows go to their lifestyle and consumption, and to pay off loans and debts, not to invest in assets.

The rich mentality is the one that puts all its financial flows into daily assets and consumption and avoids ?liabilities?, that is, loans and debts. People with this mentality depend on investing their money, and they use the return on investment to invest again.

The importance of setting goals
In defining personal financial planning, it is a “personal file of a comprehensive financial plan that helps its owner develop his understanding of his current financial situation and what it will be like in the future.” The importance of this plan is that it helps its creator to face financial benefits, some of which are expected and known in advance, such as the dates of payment of debts, school installments, and child marriage for example, including unexpected ones such as illness, disability, unemployment, and having to travel for some reason, death and the like, which requires large expenses relatively.

From the reflection on these aspects that financial planning must take into account, we conclude that no single financial plan can be applied to all. Each individual and family has its own data. But there are principled basics that must be adhered to when developing any financial plan.

Personal financial planning begins with a set of steps, which include determining the current financial situation and then defining and understanding the areas of money disbursement, determining financial flows and the rate of return on investment, identifying sources of risk to funds and developing solutions to protect them. And most importantly, a written list of the objectives of planning, which must be specific, measurable, realistic and achievable, and set out in a timeframe.

Personal financial planning infographic

Lack of prioritization is one of the most anticipated issues. These priorities must be written

Prioritization sometimes requires dispensing with one goal if it conflicts with another goal more important than it
It is very important to anticipate events that require their own expenses.

what are the steps in personal financial planning

To set smart financial goals, it recommends four steps:

01
Writing goals and setting them

02
? Determine the expected time to be achieved
One year for the short-term plan, five years for the medium-term plan, and more than five years for the long-term plan.

03
? prioritization
It includes the removal of random expenses.

04
? Analyzing the existing financial situation

After defining the goals and gaps in existing financial behavior (such as buying things that we really do not need), it is the role of developing the financial plan and then applying it. And later review it periodically, to ensure compliance with it.

Lack of prioritization is one of the most common problems that can be expected. Prioritization sometimes requires dispensing with a goal if it conflicts with another goal that is more important than it. And on the proper disbursement of money that does not interfere with the implementation of the financial plan, ?It is very important to anticipate events that require their own expenses, such as holidays, for which we can start shopping for it before it falls, because shopping during it is a common mistake, as it is often included then.

Random expenses. As well as the so-called offers and the temptation of discounts offered by the stores at certain times, and we are indispensable. The shopping list should be prepared based on an inventory of what is in the house and what is needed only.

Smart financial goals should be specific and not general or vague and also measurable in terms of financial value or percentage and can be achieved so that they are not incapable and relevant in terms of prioritization and it is imperative to remove randomness from expenses and also these goals must be linked to an expected time frame Short, medium, or long-term.

personal financial planning template

personal financial planning example

Budget 20/30/50

Budget 20/30/50, which ranges from basic needs to personal desires, as follows:

Basic expenses 50%
? 25% for rent and loans
? 10% for transportation (including vehicle fuel)
? 5% for water and electricity consumption (rationalization of consumption in these two areas is part of the plan)
? 10% of home food and necessities

Financial priorities 30%
? 15% saving (for investment)
? 10% for retirement
? 5% for financial products (credit cards, health insurance, property insurance, etc.)
? 5% of medical expenses

Personal options and lifestyle 20%
Entertainment
Personal Care Supplies
? Clothing
? Interests
? Eating in restaurants and going to cafes
? Other expenses

From financial independence to financial freedom

Perhaps the most important result of investment for a good investor is that it allows its owner to move from a stage of financial independence to financial freedom. The difference between the two is great.

Financial independence, as spokesperson Marwa Harb explained, is capable of meeting the three basic needs: food, clothing, and housing, without any debt for this purpose. The income is greater than the related expenses.

As for financial freedom, it is the ability of an individual to do what is planned financially without any restrictions related to work or any other consideration. In financial freedom, the money of the individual is his work and he is not the one who works for it.

Investing in oneself will pay off later. It increases the value of the individual, which in turn is reflected in an increase in his financial income.

It is clear from allocating 20% to personal options and lifestyle that financial planning is not deprivation and austerity, but a follow-up, commitment, and growth of money. ?One of the biggest problems that we suffer in threatening financial planning and our expectation of trouble lies in the love of social aspects, such as buying expensive clothes Or borrowing to buy a luxury car, without taking into account what constitutes the price of these things for our financial condition

Financial tips that everyone should know

? Personal financial planning must be adopted at an early age because the process becomes more difficult as we age.

Personal financial planning, as his name indicates, is really personal, meaning that it differs from one person to another according to the different data on which it is based, such as financial flows and the number of family members.

? The financial plan must be reviewed periodically and accurately, to ensure its proper implementation and compliance. Items can be added to and deleted others.

? The financial plan is not an individual, but a family, everyone participates in its achievement and success, and it would be preferable if everyone in the family put his own small plan in addition to the basic plan.

? It is important to draw up the plan with the help of a third party who specializes in this matter because when one develops his personal plan alone, he usually tends to tolerate himself.

? It is very important for the spouses to participate in the development of the financial plan, and the presence of a common vision between them, which speeds up reaching the goals. (Some statistics indicate that the majority of family problems leading to divorce in the Kingdom are financial).

what is the final step in personal financial planning Investing, how and why?

Confronting inflation
Inflation is on the rise. And the strength of all currencies in the world is declining over time. Thus, what we buy today at a certain amount will require the same amount next year, plus the equivalent of the inflation rate. In other words, what may seem large savings today enough to live for years, will not be so if they remain in the form of liquidity because they will lose over time, and constantly, their value little by little, and only the investment whose returns exceed the rate of inflation, is what preserves these savings their value and real size And it can also increase it.

Retirement
When one retires, he loses part of the direct financial flow that was coming from his work. On this point, Al-Aql indicated that many people do not pay enough attention to the date of retirement, and do not know the sums that will actually be available to them during the retirement period, and what they will need exactly.

?When the retirement laws were introduced in the world several decades ago, the average age was 65 years. Today, it has risen to 85 years. This has caused a global problem because the requirements of the retired have increased dramatically in order to be able to secure his basic needs for this long period of time. This is what must be taken into account early in the work stage.

Childcare.
Return on investment constitutes a resource that provides basic care to children and reflects positively on the nature and quality of this care.

Wealth Development
The investment allows the development of wealth, and this allows the field to achieve other goals in the short, medium and long terms, which were not possible to rely on what is saved from a fixed salary, so the salary is a pension, not wealth. And the requirements of life require investment to meet them.
Steps to take before making the investment, the most important of which are:

? debt payment

? Neutralizing the contingency fund, because the money invested may not be recoverable in the form of liquidity at any time.

The middle and rich classes are concerned with investment because they have the necessary financial solvency and the ability of these two classes to save. Little sums should not be underestimated, because “it may create wealth for us” is that what is meant by wealth is not huge sums, but rather access to the financial lifestyle that we aspire to.

Investment risk
And tips to counter them

As the investment has the potential to make profits, it also includes the possibility of losing a certain part of the capital, or all of it in the event of high-risk investments.

In general, it can be said that the more promising and substantial return on investment, the higher the risk. But there are a number of caveats that can be avoided by avoiding the following common mistakes:

Borrowing for investment. Investment usually requires a certain time to generate returns on the investor, which means the accumulation of debt returns on its owner, just as if the investment was a loser, the losses of the investor would be doubled.

? Holding on to a losing investment. It is better to study the option to withdraw from a losing investment, especially if its performance indicators do not indicate the possibility of improving it in the foreseeable future, rather than drowning in more losses.

Work with unreliable recommendations, such as those promoted on social media, and no one knows their source and credibility.

? Exaggerating interest in the revenues of previous years. Because some investments can be very profitable at some point, and others at a later time.

Fear of investing again after making losses. Learning from mistakes is a must in investment.

? eagerness for quick earning. The results of the investment do not appear in its infancy.

Investment is not always a guaranteed process of results, but it is required to provide sufficient information about it, to be aware of its requirements and its vulnerability to surrounding and anticipated changes, and to study the appropriate timing whenever the risks are controlled and the rate of return promising.

Investment advice

? Determine the goal of the investment, and be aware of its requirements and its vulnerability to surrounding and expected changes. This requires some effort and self-education.

Study the appropriate timing, because some investments depend on their speed and time.

? Distributing investments, and not relying on one platform, that is to say, by saying popular wisdom: ?Do not put all eggs in one basket.?

? When the amount invested is average, it is good to limit its investment to three platforms maximum.

? Do not invest more than 10% of the total assets in a high-risk investment.

? Adding profits to the investment account to increase the size of the basic capital, which in turn increases the number of profits.

In conclusion, and in response to a question about whether it proposes specific areas for investment that seem at the present time better than others because it is common for only two areas, namely the stock market and the real estate sector, there is no ready-made template that we can recommend to everyone. The issue is related to each individual individually, and with the envisaged investment, and the size of the surplus he wants to invest.

Investment is not always a guaranteed process of results, but it is required to provide sufficient information about it, to be aware of its requirements and its vulnerability to surrounding and anticipated changes, and to study the appropriate timing whenever the risks are controlled and the rate of return promising.

How to teach your young children financial responsibility?

Financial education for children

The life cycle extends from childhood to retirement age. What a person reaches in retirement age is the result of what he has grown up with since childhood. There are seemingly simple behaviors on the surface, but they may have significant effects later.

For example, we often encounter a problem with parents, which is the belief of their children that the money that their parents take with their ATM card is endless money. And so we have to show them that this money is limited, which is the result of the work and effort that their parents put in collecting them to realize the true value of the expense that we give them. ?

Bringing children of a certain age to the workplace to see the effort made and that the money does not come easily, makes them realize the value of money. He said that after he made this step, his son “counted to ten before asking him for something.”

Teach your child to distinguish between his desires and needs, explain to him that the basic needs are indispensable such as food, housing and clothes, and his desires are all more than that and can be dispensed with, such as buying an expensive game or going to clubs, to know how to determine its priorities.

Help your child determine his goal of saving the money and time he needs to reach him until he finds the drive to continue saving and learns how to prioritize him.

Encourage your child to earn his own money, perhaps by doing some household chores that suit his age for a financial reward that you specify, such as polishing silver or carpet cleaning, earning money will teach your child the value of the work, appreciating his effort and spending his money carefully, and it is important that these chores are in excess of his routine tasks every day, so he learns that he helps at home because he is part of the family and not for money.

Give your child some rewards to encourage him to continue, especially if the goal he has set takes a long time to reach, you can reward him by giving him an amount equal to what he saved from time to time.

Teach him the value of money by lending it, determining the time and method of repaying the debt in advance, and he will learn an additional lesson, which is patience until he reaches his goals without placing himself in burdens above his financial ability.

Be a role model for your child. Children learn by watching if you are extravagant and you cannot determine your priorities, as your child will often acquire this character from you. You can share your child’s savings by allocating a piggy bank for you and setting a goal and let him watch you get when you save for the price.

We are talking about money, money, and money. But this should not suggest to some that there is a call for scarcity and miserliness, as charity is one of the virtues that we should accustom our children to. We must start by cultivating the conviction of the child about the importance of dividing his own expenses for himself and for charity.

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