The Power of Financial Planning for a Typical Nigerian - Part 1

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Friday, April 01, 2016 7:00am / Grace ‘Jare-Ajuwon 

The reality of the Nigerian economy in recent times has undoubtedly challenged businesses and individuals alike. Many contend with how best to thrive while ensuring compliance with regulatory requirements, as they manage to enhance their sources of income.  

It is thus pertinent to ask the question “how to thrive”? The answer to this can be found in having a comprehensive financial plan which is essential to building long lasting financial wealth. This will be the focus of this personal finance series. 

In this introductory part, we shall be looking at the basics of financial planning.

What is a financial plan?
In simple terms, a financial plan is a list of actionable steps to take towards attaining financial wealth beyond your current financial status. For instance, if Mr. Kotun intends to attain financial wealth of five hundred million naira (N500m) in five (5) years and he is presently earning one hundred thousand naira (N100K) monthly. The step by step methods/process to achieving this goal is what financial planning is all about 

A corollary of this is financial wealth which can be loosely explained as the abundance of financial resources such as cash, shares, bonds, properties, etc.  

How to Plan
Planning first requires you to be true to yourself, regarding your present status. Secondly, you have to comprehend the environment in which you live and the decisions taken by the government (e.g. the budget) as well as your desire for the future (your financial goals).  

Understanding this therefore, can enable you reach out to get more information (towards attaining your financial goals) and counsel on the best way possible to attain these goals.  

Your financial plan should consist of:

a.      A statement of your current financial status: This helps you ascertain all sources of income (active & passive) available for you to achieve your goals, as well as all the expenses you make that “eats” into your income or may prevent you from attaining your financial goals.

b.      A set of assumptions based on current economic realities

c.       A list of strategic steps to take towards sustaining your current status and/or progressing beyond that status. The strategic steps should include what you intend to do concerning your:

i.                    Savings

ii.                 Giving

iii.               Investment

iv.                Insurance

v.                  Taxes

vi.                Debt

vii.             Retirement

viii.           Cash flow  

Why you need a financial plan
The benefits of having a financial plan are enormous and this is why you need to have a plan. Some of these benefits include:

a.      Peace of mind – less worry because you have planned based on realistic assumptions

b.      Security – towards the future

c.       Discipline which increases your drive to do better

d.      Increased income – you can move from the level of sustainability to thriving regardless of the difficult times.

e.      A better future – builds your asset 

In our next series, we would take a critical look at “savings” as a strategic financial planning step. You can also be a part of this by sharing with us via market@proshareng.com  

Stay connected with Proshare Finance for more….

 

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