Financial planning theory is the same for business budget planning as it is for personal planning. The theoretical planning involves five simple steps that allow you to identify your budget’s potential and set financial goals for your personal budget. The theoretical approach also allows you to create an active plan that can help you reach your financial goals. Financial planning is ideal for those who want to eliminate personal debt or start saving money.
Before you can start planning your personal finances, you need to have a full operational budget. Create a budget if you do not have one, in which you address your overall assets and liabilities. The budget should also be operational, which means that it should address your monthly income and spending. The money you have leftover from your budget is what you will use to create your financial plan. If you do have a budget, make any changes you desire to it before you start planning your finances.
Setting Financial Goals
Put the budget aside and set your financial goals. For example, address any loans or debt you may have at present time and set your goals according to these liabilities. You may want to pay off your loans within the next five years. Set a few financial goals and set deadlines for these goals. Calculate how much money you need to set aside for your goals to be reached and set it aside.
Comparing Goals to Budget
Compare your financial goals to your monthly budget from the first section. See if it is possible, for example, for you to set aside $400 each month to pay off loans. Comparing your budget to your goals may reveal that you can only put aside $200 each month without compromising your fixed and flexible expenses, so you may need to adjust your financial goals.
Developing a Plan
Create a plan that is suited for both your operational budget and your financial goals. You may discover that changes need to be made to your original goals based on your budget potential, so create a plan you can realistically follow each month.
The plan must be evaluated on a biannual or annual basis. Unexpected payments may surface, such as healthcare needs and car repairs, so your budget may not hold each month. If such a situation occurs, work to get your plan back on track, so you reach your financial goals.