What is "financial plan"

What is a financial plan?

For most of the actions in our life we have a plan. It can be explicit (like a house building plan) or implicit (we go from home to the office and always have a route, which is actually a road-plan). Cleaning our apartment we also plan - first clean furniture, second - floor. If we plan such trivial things - why don't we plan our finances?
Financial plan is one of the most important roadmaps in our live! But we usually pay so little attention to it. Why?

Why we don't plan finances?

Do we really have an answer to this question? We lie to ourselves that we have no time for this. But is it really normal to have no time for such an important thing as money? Can we live without money? If the answer is "no", why we do not pay attention to this matter?
I guess that people usually understand that their financial status is not as good as they would like to. And the reason of not having a financial plan is simple: people do not want to the the truth. They are afraid of it.

Why financial plan is so important?

Say, we understand our financial status does not satisfy ourselves. Then... it needs to improve. But to improve something we need three things:

clear vision of the current status
understanding of the desired point
the roadmap from #1 to #2.

and yes, it is actually the financial plan!

Another case - we are happy with the financial status we have now. The keyword is "now". Because the situation may change in the future, and we should be prepared. We might need to build a financial "safety cushion". And, like any building it requires a "building plan" - financial plan.

Comments

Poor or rich?

Simple question from the first sight.
U.S. Census Bureau defines poverty as a certain income level, which is $1062 a month for a single in US.
However, the life is not such easy. All people are different and have non-identical needs.
House rent, mortgage are not the same everywhere. Deceases, allergy any other special needs - all these raise the expenses.
Another definition of poverty is inability to keep expenses under incomes. And such way is hard to define: under certain circumstances even $1M of income is still poverty.
Furthermore, many people do not see themselves in poverty: the feeling of high incomes keeps them blind towards expenses until it is too late.
We take new financial liabilities, debts, burden. Buying a new house or getting a baby - all this raise expenses and we feel wrong only when our savings fall to zero.

The threshold, point where the lines of incomes and expenses cross, is often not noticeable for the majority. But even this is too late to start acting.

The wis…

Finance Planner Birth

Basic Financial Questions-Where is my money gone? -How much did I earn in the past? -How much do I have right now? -What can/should I spend less on?
These basic financial questions can be answered only by 39% adults in the US (Business Insider). 61% do not track their spending. The ability to answer these is the first step of financial literacy. There are many tools on the market that help track earnings and expenses. Advanced Questions-What should I pay this month? Tomorrow? -How much money will I have in 8 months? In a year? -Is it worth to take a bank credit to start a new business/project? -When can I buy a new house/car? -Will it be possible for me to pay the mortgage for the new apartment?
These advanced questions for personal/family finance management is that our team wanted to help answers.
We took up a challenge to create a finance management system for individuals, families, small business. Our solution is named “The Finance Planner” or simply "fiP" and planning was our prim…

Check out Elastic Budgeting

It's not a secret that fiP supports elastic transactions, which is multi-source and/or has multiple funds dispositions. This key feature of fiP was available from the first days of live.
However, finance plans were non-elastic.
That had a good reason underneath.

Imagine you have planned expenses for diesel $200/month. For budgeting it's enough to have planned monthly transactions $200 each. If you refuel (say, for $35), then you just cut the planned transaction: $35 is committed, $165 is still planned.
If we happen to spend more that it was planned for the current month, fiP will take the missing part from the next month:
- having $200 planned for diesel, we spent $210. Then, the $10 will be taken from the next period.

What if we have multiple fund dispositions? Planning public utilities as a single elastic plan:
- electric power - $10/month
- water - $8/month
- gas - $2/month.
What will happen, if we commit a part of this transaction, but some sub-plans are exceeded? For…

Finance Planner

Search This Blog