In simple terms, financial planning is the art of making sure you have all the money you will need for personal use or for financing projects, such as homes, cars, education, retirement and other long-term goals. In general use, a financial planning is a detailed analysis of an individuals current and future financial condition by the use of current and anticipated factors to project future income, wealth and expenditure. Financial planning is necessary for everyone today, as the current economy is showing signs of weakness and uncertainty. The uncertainty of the current and future state of the American economy has many people worrying about how they will meet their financial obligations in the future.
As with any type of major life decision, the process of creating and developing your financial plan should be a very serious and deliberate process. It should begin with a well defined set of financial goals and objectives that you have developed on your own or through the help of a third party. The initial step of any financial planning process is to define and write down your financial goals and objectives so that when you start working on your budget, you will have a clear direction to guide you.
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In addition to the financial goals you will develop for yourself, you will also need to decide what your goals will be for your spouse and family as well. You may want to set aside funds for a specific purpose such as a down payment on a home, college education for your children, or to pay off some outstanding debt. Regardless of the purpose you decide to create your emergency fund, it is important that you set aside funds for that purpose before you begin your financial planning. A good financial plan will make sure that you have both a solid foundation for the future and an adequate emergency fund should the need arise.