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Principles of Smart Financial Planning

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The financial life of every individual is usually made up of income and expense, but sometimes, making sense of your finances can be a hassle, especially when you are trying to meet set financial goals.

To make sense of your financial situation, you need a customized financial planning system, and these five principles of smart financial planning will get you started on the right track.


The first step in planning your finances is to make sense of your income and expenditure, and this means budgeting. It is important for your financial future that you know exactly how much you are earning and what you are spending. The content of your budget will paint a clear picture of your cash flow so that you can easily tell if you are spending money on the right things or not.

Also, when you budget, you will find it easier to control your spending. If you cultivate the habit of spending less than you earn, and do this over time, you can be sure of a good financial future.

2. Think Long Term

Another great principle of smart financial planning is thinking long term. When you adopt a long-term financial planning approach, you will discover that your financial decisions will change for the better. Thinking long term include setting long-term financial goals that cover old age, retirement and a security net for your children, amongst other things. You can start by setting aside a little money every month in your retirement fund.

3. Maintain an Emergency Savings Account

An emergency savings account is an account you set up, separate from your regular account, where you can easily get funds to handle emergencies.

Maintaining an emergency fund is a good idea because it prevents you from dipping into your normal life savings when the unexpected happens. For example, an emergency fund will provide the cash you need to carry out the much-needed roof repairs after a particularly bad storm or fix your car after an accident not covered by your insurance.

Even though it is called an emergency fund, it is no different from your regular bank account, and you can run one with a normal savings or current account. However, the money you will set aside each month is saved for a rainy day.

4. Control Debt

When you use your credit cards to buy things you don’t need, you are piling up debts that may come back to haunt you in the future. This is why it is a good idea to limit your use of credit cards and credit facilities.

Gathering debts may look good at the moment when you are buying the things you want, but when it comes to paying back, it can distract you from your ability to invest and save.

5. Make Your Money Work for You

When it comes to smart financial planning, it is never enough to simply save. You also have to explore viable options for financial growth – this means investments.

However, because investing can be risky, it is advisable that you get expert help when considering investment opportunities. This is so you can avoid investment mistakes and put your money in an investment that will bring in returns.

If you apply these five simple principles to your own financial planning, then you will be on your way to a more secure financial future.