I. Financial Planning
The first step in the financial planning process involves identifying personal financial goals, such as paying off debt, building an emergency fund, or saving for a specific purpose like retirement. This step requires analyzing income and expenses to determine how much money is available for saving and investing. A budget is created to track income and expenses, categorize spending, and prioritize needs over wants. Financial planning tools like spreadsheets or budgeting apps can be used to streamline the process. Next, short-term and long-term financial goals are established based on the analysis, considering factors such as risk tolerance, time horizon, and liquidity requirements. This foundation sets the stage for making informed investment decisions and ensuring alignment with overall financial objectives.