The $teps of Financial Planning

Learning the Ways of Financial Planning

Component One: Budgeting and Taxes

Budgeting is the process of forecasting future expenses and income. Creating a budget involves four steps
Establishing your net worth

  • Net worth= Assets- Liabilities
Establishing your income
  • The higher education you obtain the greater your income will be
Identifying your expense
  • Example of typical expense might be clothing, groceries, car payments, and etc.
Considering the impact of taxes
  • As your income increases you will want to include taxes in your expenses

    Component Two: Liquidity Mangement

    Liquidity is defined as how much readily cash you have available on hand for immediate wants and needs. Money and credit management are both involved in liquidity.
    Money Management- decisions about how much cash or liquid assets you keep on reserve and how to invest them.
    Credit Management- decisions about getting credit and using credit

    Component Three: Personal Financing

    Finance is the remaining amount. Financing is mostly used for long term borrowing. An example might be a house or cars. An example of financing is buying a 5,000$ car and only paying 1,000$ for the down payment. You can get 4,000$ worth in financing by a loan.

    Component Four: Protecting your assets

    As your assets accumulate you need to devise a plan to protect these assets from risk. Risk is the possibility of a financial loss. Insurance is a great way to make sure you can regain your assets.

    This Informative Newsletter was Created by:

    Erick Hurtado and Jordon Edwards