Financial planning is the process of identifying steps and resources required to accomplish one’s life goals. These goals are split into short, medium and long-term goals.

Let’s have a look at the first two steps in starting your journey of realizing the goals that you have in mind.

1) Assess your financial state

To help understand where you stand with your personal finances, you start by calculating your assets and subtracting your liabilities. Your assets are for example cash in hand, investments & your home, and your liabilities are what you owe (debt) such as a mortgage, car loan, personal loans, retail accounts. A negative value means you are currently owing more than you own and will not be able to fully pay off your debt.

2) Track your spending

Change does not happen overnight, tracking your spending habits and triggers will assist one with cubing behaviours. Spending behaviour is an act of disbursing money in response to an action, environment, or person in the satisfaction of needs and wants.

The key to good money management is separating needs from wants. If you are not sure if an item is a need or a want, do without it for a period of time. If after that time you truly can not live without it, it may be a need. However, even the essentials like accommodation or transportation involve a want vs. need calculation. Tracking your spending will help one understand if their needs and wants and prioritise the needs.