Financial Planning: Step 1 - Knowing yourself better
The first step in financial planning is to know your resources to understand yourself better. Unless you have clarity of your past and present, you cannot plan a bright future. You must be wondering how to know oneself better. To be honest, it is not easy - but we will make it easy for you.
Below are some of the questions you need to ask yourself and then find answers to them. Once you have answers, you will know yourself better.
Here are the top 6 questions you need to ask yourself:
How will you describe your emotions about money when growing up?
To answer this question, you have to go back to your past. Try to figure out who shaped your personal views about finances. What were your views in the early days when you were growing up? You had easy access to money, or was it hard?
What can give you sleepless nights?
You will have to find what financial situation can give you sleepless nights - now and in the future. Will your investment in stock X going down by 50% bring in sleepless nights, or running out of money in retirement will give you sleepless nights. Once you have answers to the question, you will know what kind of investment you need to make today and in the future.
What are your passions and hobbies?
When it comes to creating goals, most people are unaware of what goals to write down. The answer to that exercise has roots in this answer. Some of your goals will originate from your passion and hobbies.
Who are important people in your life, and is their life secured?
List down all the important people in your life. Next, try to find out if their future depends on you. In case of an unfortunate event, will their future be impacted? If it does, you will have to do something about it.
What are your sources of income and your total expenses?
You should know your total income and expenses.
How do you picture your retirement? A large part of financial planning is about planning for retirement. Hence, you should now have a clear view of your retirement. Whether you would like to work in post retirement or you want to spend all the time with your loved ones in your holiday home?
You can do financial planning much better when you have clear and detailed answers to the above questions. If you think you are not well equipped to find answers to these questions or understand the importance of the above questions, you can get in touch with a financial planner. It is worth an investment to grow your investment.