How important is financial planning?
If one day you come from home and want to go downtown to play. You have a car full of gas and health, but you still can't get there without a map. The map is absolutely important, you can reach your destination. The farther and faster you want to go, the more important the map is.
There are businessmen who have never studied, but the principles they practice are absolutely consistent with standard financial principles and thinking. Those are natural talents. As for you, you have to study.
What is financial planning?
A financial plan is different from a business plan. Financial planning is how you manage the financial resources you have/will have to achieve your goals.
Earn 400 million / year: This is not a financial plan, it is simply a work and business plan.
By age 50, have $2 million: This is a financial goal, not a financial plan
Your financial plan must clearly identify the following factors:
Resources (capital) are / will be available
Your financial goals (amount)
Methods of increasing the value of resources (Investment / what to do)
How much time is needed, what efficiency is needed?
A simple example of a financial plan: Have 200k USD, intend to invest in real estate with an efficiency of 18%/year to become 1 million USD after 5 years (Just an example, no in-depth analysis and analysis). into the plan).
The plan is like a car on the road, with speed, distance, time and from there the car's results to the destination can be estimated. Of course, the car doesn't always reach its destination or arrive on time, but at least when on the road you always need this prediction.
Effects of financial planning
When you don't build a financial plan, you're like a wanderer. Try your best, try to make a lot of money. There is no standard estimate: How much, how long. Spending also becomes more out of control. Because you don't have a clear plan for USING money, you quickly fall into spending and enjoying things.
The first effect of financial planning: Better control of spending. You will fall into a state of lack of money. Lack of money is different from poverty, poverty is not having money. If you lack money, you need money for money-generating plans. Of course, when you have this feeling, your need to spend will decrease. On the contrary, when you feel like you have "extra money" because you don't know what to do, you will focus on enjoyment. That's why people with 20 million USD borrow, but people with only 10k USD feel like they have too much money. That's because one person has a plan for money to grow, the other person doesn't.
Common goals (dreams) when not building a financial plan:
Buy a house in a big city and have a car.
There is an amount of about 1 million dollars or a little more…
Its general characteristic is that it is a fixed number that can be estimated. For the first dream, people will plan by working well. With the second dream, it is built by: Working and making excellent money.
If you only focus and MAKE MONEY, then both of these dreams are HARD, not easy. But when you focus on MONEY MANAGEMENT, this dream is not easy but of course much more feasible.
The second effect of financial planning: You will dare to set a further goal.
Develop a sample financial plan
TripMoon will try out some financial plan templates for you, first to give you a clearer picture:
Example 1
Capital 20k USD
Target 2 million USD
Method: (a) Hold 1 coin long term, requiring X100x growth. (b) Hold 1 coin X about 30 times then buy a piece of land waiting for X3.
Expected need: 3 – 5 years
Note that these assumptions are all examples.
Example 2
Capital 100k USD
Target 1 million USD
Method: Invest in real estate up to about 300k USD, then save to have 1 million USD
Expectation: Need 20-30 years
Example 3
Capital 100k
Target 1 million USD
Method: Invest in stocks with annual performance of 40%
Estimated time is 7-10 years
Example 4
Capital 10k
Target $20 million
Method: buy lottery tickets
Estimated time: Until the money runs out, about 2 years (Due to not drawing every day)
All methods have a probability of success. Even in example 4, even though the probability is small. Of course all 4 are not easy, but it certainly has a higher chance of success than doing nothing.
