A proper personal financial planning addresses these issues only and devise a path to achieve financial goals. There are many factors that influence this. 4 most important personal factors which can make or break any financial plan:
1. Spending Behavior
Your complete financial life is linked to your spending behavior. This factor sets the foundation of your financial future. Your goals, targets, and achievements all are linked to your spending pattern. There is very common saying that “An inability to control spending is the root cause of most personal finance disasters.” If you are serious towards your financial future, follow a budget, define your needs and wants, control impulse buying, and stay focused on your goals.
2. Investments
Investments are also one of the important factors which directly affect a financial plan performance. Most people put off investing in their futures because they are focusing on the here and now. They are either trying to make ends meet, or haven't prioritized things such as retirement plans yet. The problem with this is the longer you put it off, the harder it becomes to save or prepare. Investment vehicles like Life Insurance, 401k's, IRA's, can yeild very nice returns the younger you are when you start them. Some of them you can use the cash value before reaching retirement age without penalty for qualified transactions.
Selection of any product depends on your personal and family’s acceptability of risk and the time left before the goal. Understanding of how different asset classes’ work and controlling your investment behavior is very much required for any investment to help you achieve your goal.
3. Provisioning for emergencies and risk management
SAVINGS. Your financial plan will definitely fail if it has not taken a holistic view of your personal finance and answered all “what ifs”. It is wrong to consider that financial planning is just to make investments to achieve goals. Until every aspect of your finance is in order, financial planning can’t be called as complete and neither will it succeed. In the financial world, it is advised that you save at least 6months to a year of living expenses in case of emergencies.
4. Financial Advisor/Planner
Your financial advisor/planner also plays a key role in your personal finance. Different people have different kind of advisers. Many take financial advice from Friends, family, Insurance/mutual funds agents, bank relationship managers, share brokers, accountants etc. Many follow some Personal finance blogs or TV shows to work on their financial life, and many have engaged some professionals like (CAs, CFPs etc.) as their Personal Financial Planner.
The success or failure of your financial planning depends on the competency of that advisor and how you execute the advice you are given. Because different advisors have different approaches (there is NO 1 SIZE FITS ALL WITH FINANCE), it is best to deal with 1 at a time until you find the one you are happy with. Conflicting views and methods will only confuse you and stunt progression.
Your plans should consist of accomplising your goals by tackling all 4 areas of planning with an application of the best strategy for your situation.
A failure to plan is a plan to fail.