WITH age comes wisdom. This is scientifically supported by the maturity of the human brain's frontal lobe around the age of 25. The frontal lobe is the part of the brain responsible for complex decision-making and behavior regulation. It was around this age that I recognized the critical importance of financial responsibility. At 25, my goal was to purchase a car to gain freedom, flexibility and convenience. To achieve this, I took out a bank loan to cover the cost, while my savings covered other incidental expenses such as insurance, maintenance and registration. As I drove this new car, I realized that managing finances is much like navigating a journey.

In the Philippines, financial planning has never been more crucial. According to Sprout Solutions' 2024 Report, 41 percent of Filipinos have no savings at all, while only 25 percent feel confident about their financial situation. This highlights a significant gap in financial literacy and planning that needs to be addressed. The lack of savings leaves a large portion of the population vulnerable to financial shocks, such as medical emergencies or job loss. Without adequate savings or a solid financial plan, many Filipinos are at risk of falling into debt or poverty.

Moreover, the low confidence in financial stability indicates that many people may not have a clear understanding of how to manage their finances effectively. This underscores the importance of financial education and the need for individuals to take proactive steps in planning their financial futures. A well-structured financial plan can provide a sense of security and direction, helping individuals to set realistic goals, manage their expenses and invest wisely for the future.

Financial planning is not just about making occasional pit stops, but it is rather a journey toward a more peaceful life. As a Forbes article describes, financial planning is not merely a portfolio of reports but rather an intricate detail that caters to one's needs. Financial planning encompasses investment, insurance, education, budget, tax, retirement and estate planning. These can be classified into two sections: financial planning for individuals and for corporations.

The difference between financial planning for individuals and for corporations is significant. Individuals' decisions are more diverse, making their goals harder to quantify. In contrast, corporations have clear, structured goals outlined in their contracts, leading to a more systematic approach to managing assets and equity.

Beneath these two sections and various aspects lies a three-step financial plan that forms the foundation for every financial decision:

Define your goals clearly and more specifically

Since our firm's fiscal year begins in July, I align my financial goals accordingly, as it is also my main source of cash flow. This makes it a strategic approach to my planning. I categorize these goals into three: primary goals, secondary goals, and other goals. Begin by defining your top financial priority, whether it is saving a house or building an emergency fund. Then, identify the secondary goals that are not urgent but just as important. Lastly, consider any additional goals that are neither important nor urgent. Once you have defined these goals, craft clearer and more specific goals for each one. This helps you effectively track your progress, stay on budget and adjust as needed throughout the year.

Quantify your goals in financial terms

After defining your goals, translate them into numbers. When you do not have a clear idea of how much money you will need and by when it is nearly impossible to develop a plan to achieve these goals. For instance, instead of just wanting a "secure retirement," define what "secure" means to you. Is it a specific monthly income you need to maintain your desired lifestyle? The clearer and more quantifiable your financial goals are, the easier it becomes to track your progress, adjust your course as needed, and ultimately achieve the financial security you desire.

Rank your goals

Once you have quantified and defined your goals, rank them. With limited resources, it is crucial to strategize how to prioritize these goals. This involves having a good understanding of your long-term and short-term priorities. For example, if building an emergency fund is more important in your life, it might prevail over saving for a fancy car. This could contribute to having the higher-ranked goals receiving a larger portion of your income, while lower-ranked ones might need to be scaled back. Remember, as individuals, our choices may change, making prioritization a dynamic process. Do not be afraid to revisit your rankings and adjust them accordingly. The key is to have a system in place to make informed decisions about where to direct your income.

Even with a three-step financial plan, seeking advice from professional consultants is still important to avoid rash decisions and biases. In P&A Grant Thornton, we follow a structured process: from data gathering, identifying the strengths, weaknesses and limitations of our client, analyzing the risks, and giving valuable insights to clients to implementing the plan itself.

Embarking on this financial plan is indeed a journey. There will be trials, tribulations and pit stops along the way. But do not fret because the seeds that you have sowed in this journey will bloom. The ripples you create through proper financial planning can help pave the way for a vibrant and prosperous tomorrow. By the end, you will not only have achieved success in financial planning but also have peace of mind knowing that you have created a secure and fulfilling life.

Seb Serrano is a senior managing consultant of the Advisory Services at P&A Grant Thornton. One of the leading audit, tax, advisory and outsourcing firms in the Philippines, P&A Grant Thornton is composed of 29 partners and 1,500 staff members. We'd like to hear from you! Tweet us: @GrantThorntonPH, like us on Facebook: P&A Grant Thornton, and email your comments to pagrantthornton@ph.gt.com. For more information, visit our website www.grantthornton.com.ph.