PLANNED FUTURE FINANCIAL CONDITIONS
Has become a common phenomenon that many of our colleagues, or people around us who frequently complained that the conditions of the financial. The loan amount in excess of its revenues, and even exceed the number of assets that it owns. In such a condition that usually becomes a scapegoat is the small amount of income he has.
But the root of the problem which is actually not located on the side of income alone, but a failure to manage finances. Many of us who do not have financial planning, never even thinking to plan financial condition, let alone in the future. Financial planning is the absolute activity to be performed by any person and this is what will distinguish between a group of people who always stuck by the difficulty of liquidity and the Group of people who can enjoy life. This paper will try to discuss in a simple, how one should start planning financials.
Diagnosing the financial condition
The first step that needs to be done in preparation of financial plan is to diagnose the condition of our personal finances at this time. To note in diagnosing the financial condition is the magnitude of the total revenues, total expenses, the size of assets and liabilities debts we have.
In general it is clear that total income should not exceed the total expenses. For those who have a fixed income every month then could easily estimated the magnitude of the total income in one year, including income non routine such as allowances and bonus feast day. Then its expenditure should be regulated not exceeding total revenue routine that he possesses.
The income of the non routine should not be allocated to bear the total expenditure, but it must be allocated for the purpose of investment or reinforce emergency fund. As for people who have that kind of income variables (not fixed) then the total of its expenditure may not exceed 80% of the average income.
The next post is the asset that needs to be noted. We often mistakenly defining about assets in relation to financial planning.
The assets are in fact everything that delivers productive activity or support us. A simple example is the House we live in and the vehicle we wear can be classified into an asset because it supports our productive activity, while villa, stereo set, an acoustic guitar, golf and a second vehicle that is rarely we wear, definitely not an asset category. Savings and investment is one of the tangible assets yields.
Debt is the plural thing is done and is not really a thing that needs to be feared. Debt in fact is adding to the buying power of our revenue by attracting us in the future to the present. Are analyzed in terms of debt is a type of mortgage debt and liabilities we have responsibilities. Home credit and productive vehicle is definitely the kind of debt that is reasonable and can be tolerated, but credit card debt is a type of debt that is absolutely to be avoided. Interest rate credit card debt average reach 35 – 48 per cent per year and this is clearly burdensome financial digitalis us.
Given the size of the interest rate credit card, then use a credit card to look out for limited funds for the sake of practicality and comfort only and not to increase our buying power with the way owe. In terms of managing debt, the magnitude of the total liability of our debt repayment should not exceed 30 percent of our total revenue. When we’ve been stuck on the conditions of the obligation to pay the debts that exceed the threshold, then the restructuring absolute debt have to do with prioritizing on debts that have high interest credit card debt, such as credit without collateral, and the like.
Having An Emergency Fund
The second step in the preparation of financial plan is to check the availability of emergency funds that we have. An emergency fund is a Fund at any time must be available when unexpected expenditure arises. Many people don’t think about the availability of an emergency fund in their financial planning, so that when unexpected expenditures arise then that is often done is add the ability of purchasing power by creating debt, and usually this type of loan is a debt with such high interest rate credit card debt and credit/loans without collateral.
Whereas it is clear that the actual debt should not at all be a mainstay for unexpected expenses this close. This is where the importance of the availability of the Emergency Fund, so we don’t get stuck coils of high yield debt. The magnitude of the emergency fund to be owned in the financial planning vary, ranging from 5 to 20 times the total monthly expenses.