Abu Dhabi 9th September 2024: The General Pension and Social Security Authority (GPSSA) has launched the “Financial Decision Making” course within the Advanced System for Proactive Financial Planning program “Wafra” on the future government talent platform “Jahez”. The course provides a vision on financial decision making and understanding the challenges associated with these decisions. It also reflects the agreement between the two partners on how, when, and where these funds are spent on their efforts towards planning for the future.

Financial planning is done on the medium and long term due to the people’s desire to achieve their ambitions and finance their future plans. To maintain growth and overcome future income challenges, people need to save or invest, so that they can have enough income upon retirement or stopping work. Short term financial spending usually affects the achievement of long-term goals which are also affected by saving and investment decisions.

The best time to start saving is now. Saving should be a habit, regardless of the saved amount, so that savings grow and the individual can have enough savings to meet his future plans. It is important for the individual to make saving an automatic process, distinguish between desires and needs, and be a role model for his family and children. The main steps to saving include setting a budget, reviewing expenses, and understanding the family’s cash flow.

Allocating a portion of your income for emergencies is not just a good practice, but it is also a necessary habit. An emergency can happen at any time and requires immediate spending. At this point, there must arrangements to ensure that you have enough money to overcome the situation. This money is not intended to achieve any desired goals, but rather to act as a safety reserve. Preferably, the emergency money should be an amount equivalent to the family’s expenses for 3 to 6 months.

There are many factors affecting the individual’s financial planning strategy, such as marital status, financial situation, current lifestyle and expectations, personality traits and risk behavior. The features and characteristics of the effective financial planning include several features, the most important of which are realism, where goals should be realistic and within the context of income, clarity, as an ambition can be achieved if its cost is clear, appropriate timing, as time frames must be applied to the budget, flexibility, so that a person must be able to make changes to the plan when necessary, and documentation of the financial plan so that it becomes a reality.

It is important to understand the sequence and steps of financial planning, so that the plans should be effective. The financial planning process phases can help assess the current financial situation and map out the financial situation aspired by the individual in the future. The planning process first phase includes ambitions which we aspire to reach within the life cycle. To achieve ambitions, the person must define his goals. The second phase involves the time frame, which includes identifying time periods in line with an expected timetable for achieving the goals. The third phase is related to the starting position, which is just an overview of the current financial situation, because auditing and reviewing the current resources is considered the starting point.

The fourth phase is about prioritization, by creating a list of the most important items. At this point, things should be identified by priority. Moreover, the list of goals should be filtered, so that one or two realistic goals must be chosen, where focus can be placed on both or the most important of them. The goals should also be identified in order and by their priority. The fifth phase is documentation to ensure that the financial plan is recorded, which helps to remember details and commit to appropriate course. The sixth phase is implementation, which includes implementing plans and managing the monthly or annual budget effectively. The seventh phase is to evaluate the financial plan, since financial planning is an ongoing process and not a one-time activity. Finally, the review helps people know whether the goals they have set will be achieved, and to evaluate whether the plan has been well implemented.

People have a number of ambitions and events during their life cycle, which they need to plan and finance. They may develop several plans simultaneously, but within different time frames. Short-term plans may last for a week, a month, or a year, while long-term plans may extend for a longer period of time, may be decades. Therefore, in order to set a budget, it is required to determine the expected income and apportion expenses according to the desired goals, while setting a limit for each category of these goals, allocating appropriate amounts for them, tracking and adhering to the spending process or making adjustments thereto if necessary, especially with some unexpected external factors affecting the financial plans. These factors may arise from the external environment in which the individual lives, or be beyond his control and affect him, such as inflation, interest rates, and financial asset prices.