Question

300 Words

Discuss an activity in your life which caused you to understand the need for a personal financial plan and how you began to set up a plan for yourself. It may not have been a formal plan, just an awareness of your financial situation and some steps that were necessary for you to take to implement the plan

Answer 1

An activity in my life which caused me to understand the need for personal finance plan was when my father faced financial trouble when my sister was getting married. Expenses ran high during my sister’s wedding and there was a clear mismatch between the sum of cash inflows and savings when compared to the cash outflows. My father always thought that he had saved enough for big expenses like education of his children and marriage of his children and hence he never prepared a personal financial plan for himself and the family. It was only during the marriage of my sister when expenses were difficult to meet that me and other members of the family realized the need and importance of personal finance plan.

It was immediately after my sister’s marriage that I began the process of setting up a finance plan for myself as well as for my parents. I had recently started working as a marketing executive after my college and hence had started earning. The first step towards creating my personal finance plan was discovering where my money was going now. This step entailed noting my key and primary expenses as well as my miscellaneous expenses. The second step was to set financial goals for myself. This entailed setting goals like purchasing a house for me after 10 years, buying a car for myself after 5 years etc. It also entailed how much funds I want to have at a particular point in time. The next step was to start saving and this entailed ensuring that my expenses were always less than my paycheck. This will enable me to put my savings into instruments like mutual funds, bank deposits, life insurance plans etc. Lastly to ensure effective implementation I keep a regular track of the plan by doing quarterly checkups and annual checkups of my personal finance plan.

(311 words)