Financial planning is all about knowing where your money is going, and what does it do for you.
First, you need to draw a budget. How to draw a simple budget?
List down all the places/things/people on which you spend your money. Such as mortgage, rent, education (for yourself, spouse, children, or community welfare), food, entertainment, transport (whether you own many vehicles or use public means), grooming and many many more. Without listings down every person/thing that you give your money to, you will not be able to know exactly what happens to your income(s).
Second step. Separating your needs and wants. Needs are things that a person cannot live without. Wants are things that make your life better when you have them.
Thirdly evaluate that is add all your needs, and your wants. Compare it to how much you earn. If your spending is more than your earning you will not have any money left, in-fact every period you will find that you are always borrowing money from various sources like banks via credit cards, bank overdrafts and loans. Or you will find yourself borrowing from friends and family. But if you earn more than you spend you will have a surplus which you can either save or invest it. So that this money works for you, without you actively being involved. If you don’t draw up a budget you will never know where and how much you can save and invest. You can actually be wasting your financial resources without realizing that you are wasting your money. Also, if don’t earn enough money and you are always borrowing, you will never find out how to improve your life by reducing unnecessary expenses without writing/listing down and evaluating your spending.
By knowing how you spend your money, and the satisfaction you get by spending your money, you will be motivated to find how to increase your money income to get better satisfaction.
Know where your money is going. This is the key to financial freedom.