Planning Your Personal Finances Keep Your Goals In Front Of You

Planning Your Personal Finances Keep Your Goals In Front Of You

by

Rajiv Rathore

Financial planning is important if you are looking for a relatively risk free future and achieving your dreams in life. Two common methods followed by people when it comes to financial planning are profile based and goal based.

Profile Based Financial Planning

Profile based generally takes into account the age of an investor in order to gauge risk taking abilities of an individual. Based on the risk taking abilities, investments are planned. However, such a method of financial planning does not always work. This is because the end objective is not clearly defined, and investments are not well structured to meet the objectives. It is open ended planning with a greater possibility of having to compromise on your financial objectives.

For example, let s say you are 26 years old and you are a high risk taker. For high risk takers, the general strategy is to invest mainly in high risk equity funds and a small portion in low risk debt funds. However, if you are planning to buy a large car in the next one year or so, investing in high risk funds may not be a very good idea. What if the equity markets lose value during this time? That s where goal based financial planning or

financial goal setting

comes into picture.

Goal Based Financial Planning

With the goal based method of planning your finances, you take into account your short term and long term goals in order to choose the right financial products. With goals clearly defined, you can make an investment plan that is in tune with your risk taking need and ability. You will know how much of long term investments you need, and then invest this in riskier assets like equities that give you great returns in the long term. This strategic view will help you in getting great insight into where you should be focusing in your finances.

Take the above example of the 26 year old with a goal to purchase a large car. If you used goal based planning, then you wouldn t think of investing in equities as the time duration of 1 year or so, is too short to get expected returns from equities. You will instead use debt based investments like fixed deposits or debt funds to create this fund. As debt based funds give a smaller return than equities, it is quite likely that you will not meet your fund value to purchase a car. At the time of planning you can decide if you want to delay the goal by another year, or go for a smaller car of lower value. This is a great example of using goal based planning to decide on a plan.

However, keeping track of your goals and your

personal investment planning

strategy can be a difficult task, since you have your daily routine to take care of as well. Solving that problem a financial planning software.

Benefits of Financial Planning Software

A good financial planning software can help you with

A detailed road map for your financial strategy which you can easily keep track of.

Accounting and reporting to take care of your daily financial transactions.

Accurate calculations of even a complex investment strategy.

There are quite a few such software to help you with goal based planning, Imygoals being one of the best that takes a strategic financial view. Software such as Imygoals use goal based planning to help you achieve your dreams in life without much fuss. It focuses on giving you a long term visibility on your finances, without getting into the nitty gritty of accounting and reporting of daily transactions.

It is clarity that one needs to plan for a long term, not unnecessary details that will complicate the plan and make it difficult to implement.

To get more knowledge about

Financial Planning

visit this website

imygoals.com/

Article Source:

ArticleRich.com