Financial planning is an important component in every individual. It takes into account various things that are significant to the monetary decisions of an individual.

Personal finance tackles about the financial planning of an individual as well as the right methods of managing financial resources. Budgeting, forecasting of future events and financial risks, setting of financial goals as well as implementing the planned financial objectives constitute personal finance. The proper methods of saving, spending and investing also form part of personal finance.

Personal finance may sometimes refer to personal money management although the latter is considered to be a part of the former. Management comprises of planning, organizing, directing, controlling and coordinating a group of individual or more people, entities or objects for the purpose of accomplishing a goal.

Personal financial planning is a relevant component of personal finance. The keywords that can come in this process may include budgeting, saving and spending. Nevertheless, there are steps to follow in this process. These steps are: assessment, goal-setting, creation of a plan, implementation and monitoring, evaluation and reassessment.

Assessing the financial situation is the first step in financial planning. This can be made by gathering personal financial data and summarizing them into financial statements. This step includes estimating the value of personal assets along with personal liabilities. A balance sheet is a listing of personal assets as well as personal liabilities. Deferred taxes are liabilities and should form part of the liability section until they are paid. 

Meanwhile, the income statement is another kind of financial statement where it compares the total personal income and total personal expenses. Any differences in their total values may result to a profit or a deficit. A break-even may also result when the total personal income equals personal expenses.

A personal cash flow statement can help in determining the spending habit of an individual. It lists the total cash in or outright income and the total cash out or outright expenses made by an individual.

It is important to note that when making cash flow statement, income statement and balance sheet, a certain period should come in place. For instance, monthly income statement is deemed more preferable. This is because of the income and expenses are mostly earned and incurred in a month by individuals. A balance sheet can be made quarterly, semiannually or annually.

Meanwhile, cash flow statements are mostly made daily whenever it involves cash transactions such as obtaining cash and paying expenses in cash.

Assessment is a budgeting process. It takes into account the usual income and expenses that can be earned and incurred by individuals. Past financial information can be used for determining the budgeted amount of expenses while determining income can be based on the present earnings of an individual.

The next step in financial planning is setting of goals. Individuals can have several short-term and long-term goals. By setting financial goals, individuals can determine the ways on how the goals should be achieved and when they are supposed to be accomplished. It can also help individuals in formulating a plan.

The creation of a financial plan would detail the means on how to accomplish the set goals. Minimizing unnecessary expenses and enhancing employment income could be included in the financial plan. Financial plan can be devised based on the compiled financial statements.

Executing the plan can be made easily if discipline and the virtue of perseverance are employed. Individuals can implement their plans with the help of financial experts such as accountants and investment advisors.

A financial plan should be placed into writing. Goals and the possible ways for achieving them should be put in a journal. A journal containing the financial plan can be considered a best instrument whenever monitoring and evaluation are performed. Reassessment can be made easily if an organized financial plan is in place.