Planning Your Finance

Source: http://www.danareksaonline.com/reksadana

You certainly understand that every human being have necessities. An adult’s needs will always grow in line with his/her age. From the needs for marriage, buying a house and vehicle, raising children and finally happily enjoying their retirement time.

However, having considerably small amount of funds will not be enough to fulfill all those needs. For example, you probably know the property value in a suburb near Jakarta with the area of 96m2 has reached IDR 200-300 millions. You also need to consider children’s school fees that keep increasing every year. Nowadays, the application fee and deposit to apply to a public junior high school has reached millions of rupiah, imagine that it is only for 3 years education period.

These issue must raise a big question on your mind, “How can I satisfy all these necessities?” And a simple answer to that question is to do your own financial planning as early as possible, and have fun later on!

5 Steps to Have The Fun Later On!

Financial planning is a process of managing your finance in a discipline manner to achieve your desired target and purpose. There are 5 steps you need to do:

1. Check your financial health

Not only physical health, your financial health is also important and can not be ignored. In fact, your financial health should become the first priority before physical health because looking after your physical health will incur some cost.
This first step is very simple. Try to write down all your expenses in 1 month. You will be surprised when you find out where you spent your money on.
In addition, calculate all your wealth and your debts. If necessary, sell your assets to pay off all debts before planning to own something new. You may say your finance is in a healthy condition when you are free from debt.
Do not worry if you do not have any savings after paying off all your debts, because although you do not have any savings, you will be doing something much better for yourself.

2. Dream On!

The second step is to plan your needs. This step can be done by having dreams. Yes, you are right, Dream On! Ask yourself, what do you want in life? A house in Pondok Indah? Jaguar? Five-star apartment? Beat the socialite and own many designer shoes, clothes and hand bags? Or even go to Paris for honeymoon?
If you have done dreaming, then you need to wake up and see if all your dreams have fit your wealth and income. If it hasn’t; you need to start dreaming again. But dream on more realistic dreams. And do not forget to set priority and determine what your first priority is.
One thing worth to remember, other than those amusing things, you also need to include the emergency fund as your priority. Emergency fund? What is that? Emergency fund is the fund needed immediately which arise from unexpected event, such as hospital/ medication fee. Of course you do not wish that to happen but it would be wise to set aside some fund for urgent needs, just like a saying “Prepare your umbrella before it rains.”

3. Categorize your financial needs

This step is very easy. You only need to categorize your needs according to its time frame. The time frame is divided into 3 periods, short-term (for the needs required within 1-3 years), medium-term (3-5 years), and long-term (more than 5 years).
Below are the examples on how to categorize your needs:

Time Frame Financial Goals
Short-Term Emergency Fund to be fulfilled
Medium-Term Paying deposit for the house
Long Term Prepare your retirement fund


4. Recognize the investment type that suites you

The next step might be difficult, as for some of you; this can be something new or something you have not done before. You can learn about the investment type from your family or friends who have planned (well) their financial, hiring a financial consultant/ advisor, or you can also learn it from this website on the Types of Investment section.
After you understand the purpose of each type of investment, choose the one that mostly suits your financial needs.

5. Self-Discipline is Good!

All the steps you do will be ineffective if you do not have self-discipline and high commitment. Both of these basic principles are very important for everything to work well. Do you wish to have a honeymoon in Paris and enjoying your Jaguar? Be Patient! The more discipline you are and keep strong commitment in investing, the faster you reach your dreams.

Start Planning Your Finance as Early as Possible

The earlier you plan your finance and start to invest, the lesser amount of money will be needed (for investment). This will certainly bring benefits for you as you can plan more needs. Let’s look at the illustration about financial planning for education fund bellow:

You have a son and you want him to continue his education abroad when he turns 18 years old. The estimate total fund needed to finish his education overseas is IDR 1 milliard. If you put your money in a fixed-term deposit to obtain IDR 1 milliard; assuming the deposit interest rate of 6% p.a. (before tax), then the monthly investment would be:

Children's Age Investment Period (years) Monthly Investment

3 15 Rp. 3.741.270
8 10 Rp. 6.439.885
13 5 Rp. 14.704.567

Oleh sebab itu, mulailah merencanakan keuangan Anda dan mulailah berinvestasi dari sekarang!