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Financial planning : setting up revenue targets

October 27, 2020
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Financial Planning

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This article is written by Shivani Garg, pursuing a Diploma in Business Laws for In House Counsels from Lawsikho.com.

Introduction

Finances play a very crucial role in every person’s life from personal to professional so it becomes very important to have it all sorted before one set into something as it will decide what lies ahead in the future. Financial planning is important from both personal and the business aspect. Money speaks one language, “If you save me today, I’ll save you tomorrow”. 

So, what exactly do you mean by financial planning? 

In simplified terms, the process of financial planning should help you answer three questions. Where you are today, that is, your current personal balance sheet, where do you want to be tomorrow, that is, finances linked to your goals, and what you must do to get there, that is, the asset allocation and investment strategy that will help you achieve your objectives

In other words, financial planning is a game just like football, but here the difference is that the goalposts are constantly changing. When it comes to business and its growth, one needs more than just to plan what one wants from the business. One needs to know how to plan for it. Developing a business plan is critical for the success of any organization.

Financial planning – Benefits 

S.M.A.R.T. Goals: Specific Measurable Attainable Realistic Timely.

Why is personal financial planning crucial? 

To achieve what 1% of the world’s population have (Financial Freedom), you must be willing to do what only 1% dare to do. Hard work and perseverance of highest order – Manoj Arora

The stability of the personal status of individuals and families is directly related to the stability of their financial condition. Apart from having financial freedom, there are various other reasons as to the importance of personal financial planning which I have stated below:’

Budget Rule

Senator Elizabeth Warren popularized the so-called “50/20/30 budget rule” (sometimes labeled “50/30/20”) in her book, All Your Worth: The Ultimate Lifetime Money Plan. This budget rule came up with the straightforward plan so as to help out people to reach their financial goals, let it be long term or short term. The rule is demonstrated as what should be done when it comes to finances. In this 50/30/20 budget rule, 50-30-20 portions are indicated as: 50% for needs, 30% for wants and 20% in savings.

How to create a successful financial plan? 

Well, to create a life you want to live, you need to have courage to take calculated risk. There are few steps that can be followed to create a successful financial plan of your own which are mentioned below:

Conclusion

I am sure nobody wants to get doomed at the end like Vijay Mallya, The King of Good Times. What happened with Kingfisher Airlines in 2011 seems like the finest example of vague financial planning to begin with and gives a clear idea of how much revenue targets (if already set in prior) need to be accomplished a time before things go way beyond hands.

Financial planning gives you a clear view of what the risks and prospects are before you launch any business. Further, the 50-30-20 rule intends to help individuals manage their after-tax income so that all the expenses are widely covered, money is saved for retirement and along with that at the same time doing what gives happiness.  As financial planning is a very personal exercise, one needs to look towards its course of action. It is essential for both service people and businessmen apart from every individual. There are many financial planners and advisors out there with tremendous knowledge and experience to help people and business to deal with these matters so as to save one’s ship from sinking at the later stages of their lives.

“People make bad choices all the time, usually because of fundamental inability to operate over longer time frames.” – Charlie Munger


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