1. How can using personal financial planning tools help you improve your financial situation?
Describe changes you can make in at least three areas.
We all make hundreds of decisions each day. Most of these decisions are quite simple and have few consequences. Some are complex and have long-term effects on our personal and financial situations. [ The financial planning process is a logical, six-step procedure:
(1) determining your current financial situation
(2) developing financial goals
(3) identifying alternative courses of action
(5) creating and implementing a financial action plan, and
(6) reevaluating and revising the plan.
Step 1: Determine Your Current Financial Situation
In this first step of the financial planning process, you will determine your current financial situation with regard to income, savings, living expenses, and debts. Preparing a list of current asset and debt balances and amounts spent for various items gives you a foundation for financial planning activities.
Step 2: Develop Financial Goals
You should periodically analyze your financial values and goals. This involves identifying how you feel about money and why you feel that way. The purpose of this analysis is to differentiate your needs from your wants.
Specific financial goals are vital to financial planning. Others can suggest financial goals for you; however, you must decide which goals to pursue. Your financial goals can range from spending all of your current income to developing an extensive savings and investment program for your future financial security.
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