Page 12 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Unit 1: Basics of Personal Financial Planning

We all make hundreds of decisions each day. Most of these decisions are quite simple and have Notes
few consequences. Some are complex and have long-term effects on our personal and financial
situations.
The personal financial planning process is according to ISO 22222:2005 six-step processes which
are as follows:

(1) Determining your current financial situation
(2) Developing financial goals
(3) Identifying alternative courses of action
(4) Evaluating alternatives

(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

LOVELY PROFESSIONAL UNIVERSITY 7