Business
Finance
Business
finance is a written description of the business idea. In this details are
given about what type of business is and what is uniqueness in that.
Suppose you
are earning thirty thousand per month. Twenty thousand out of them is your
monthly expense. The remaining ten thousand is your savings per month. After
saving them for a couple of months you decide to purchase a new phone and after
a few months of saving the money you repair your home. In the end, you think
you are saving ten thousand per. You save nothing. With this approach, you
can't save money. It doesn't matter how hard you are working or how much money
you are earning.
If you want
to be financially free for this it is important to do financial planning. Here
are some steps which are necessary to take to be literate about finance.
1 ) Goal
identification
The first
and very crucial step is to know where to go. It means that it is important to
have a clear idea of why you are saving your hard
-earned
earnings.
Goals are
divided into three major parts.
a )
Short-term financial goal: These goals last six months and three years.
Anything wanted to be achieved around that duration. It would be kept as a
short-term goal. Emergency funds, short-term debt, or planning for a tour all
could be called short-term financial goals.
b ) Mid-term
financial goals: These goals could be achieved from three years to seven years
duration. Planning to purchase a house, buy a car, or want to manage long-term
debt. They are called mid-term financial goals.
c ) Long-term
goals: Long-term goals are those types of goals that are achieved after seven
years. Money after retirement or wanna generate wealth.
With the
process goals can be divided. But it's not enough to just decide the goals. It
is also necessary to decide the dates as well. To target the date will bring
more easiness to focus on target and the goals.
2 )
Budgeting
Budgeting we
mean what comes in and what goes out.
It is
necessary to know that what goes out is less or more important.
Because
after the budgeting which amount will be remaining, it would be saved.
Budgeting can be done online through the help of several websites.
3 )
Insurance
It is very
necessary to have insurance because life is unpredictable and no one knows
about the future. If a certain budget is saved from a person and haven't got
any insurance so far. Just one unhappy event God for bidden a single family
member hospitalizing can rune whole income planning even you might go for
taking loan. So it is important to have insurance for the security of health as
well as wealth.
So for this,
it is important to have at least health insurance if having term insurance it
will be much better. With this goal of a family as well as goals of family
could have security for the future.
Retirement
funds
During the
job, one should also have a plan for the retirement.
For an
effective retirement plan, it is necessary to know some realistic values.
Retirement
fund planning factors
Time left
for retirement
Retirement
life expectancy
Inflation
Time left
for retirement
Retirement
plan first, that in which going to retire and how many years are left to be
retired. After getting retired plan to manage the funds accordingly.
Life
expectancy
One thing that is important to keep in mind is life expectancy according to the country a person is living in. In Pakistan, the research of 2021 tells the life expectancy is 66.10 years.
Inflation
In Pakistan
inflation rate has been increasing over the years even till the first half of
2024 inflation has increased by 3.2 so far. So when a retirement fund is made
it is very crucial to keep in mind the inflation rate. Inflation will also have
to be included in the interest rate.
Important
points
Prioritize
your emergency fund
Managing
your debt
Prioritize
your emergency fund
Life isn't
always ups and downs are part of keeping a balanced daily life it is important
to be mentally prepared for every problem.
Sometimes an
unexpected situation comes like suddenly company leaving the country they are
working in. As a result, all employees are laid off from their jobs. So that is
the toughest time to manage expenses in this type of situation for an
individual. Therefore it is important to give priority to emergency funds at
least every one. If the specific amount is saved every month it will help to
overcome sudden financial challenges in the future. For any emergency minimum,
6 to 8 month's income should be saved. So that even if an individual does not
have a job for the next few months, a new job could survive well.
Managing
your debt
Debt is a
type of instrument that somewhere used by everyone.
Sometimes
for taking loans, education loans, business loans, etc.
If the loan
isn't managed properly by any individual then he/she can never be financially
stable. If anyone has a loan that should be added to short, mid, or long-term
goals. Because it is a debt and it will have to be paid in any situation.
Sometimes there are two or more two loans that are to be paid. First of all
that loan should be paid which carries the most interest. With this interest
rate will automatically decrease. A question arises in our mind what is the
simplest way to calculate all these expenses and revenues at a particular
place? In this modern era, you can calculate all these things online with the
help of a calculator and put all your expenses and revenues at the end it will
tell you how many years an individual can survive by having that amount.
In a
nutshell, this is a daily life-related topic that doesn't belong to any
specific field. Everyone should know about business finance planning. It helps
to use money properly as well as plays a vital role to manage wealth and bring
easiness to face every unexpected financial condition.
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