People who are able to manage their finances well while also investing in other assets can have a greater chance of achieving financial freedom and retiring early, as mentioned by Capstone. People who are interested in investing in houses and other forms of properties in the real estate market can greatly benefit from the features that blockchain technology provides.
Blockchain Technology and the Finance Industry
These days, people are working towards automation in almost every process and have secured ways to automate currencies, as well. This has led to the revolution better known as financial technology or Fintech, with cryptocurrency in the front lines. The main contributor to this innovation is the development of blockchain technology by different companies for various applications in the form of coins or tokens.
Blockchain technology works like digital ledgers to record, distribute, and validate relevant data across a reliable channel. This technology is usually associated with cryptocurrency, although it can actually be applied to different mediums from several industries. Aside from being used as a payment network, blockchain technology can also be used as a means to create a smart contract, which binds both parties to the terms and conditions agreed upon. Unlike traditional contracts, smart contracts help simplify the terms between the two parties so they never have to worry about the important details.
One example is the financial industry, which can greatly benefit from blockchain tech, and a main component of the finance industry is financial planning.
Financial Planning Processes and Blockchain Involvement
Financial planning is one of the many ways to get a handle on your current financial situation. It’s a process that involves looking at your finances from a bigger picture, planning every step so you end up with fewer debts and more stable finances in the future.
These are the key steps of financial planning and how blockchain can contribute to making it easier:
Assessing your current financial situation
Blockchain technology is a digital ledger that can be shared across a business network to increase its transparency. For financial institutions that are working across different channels and different sites, sharing crucial information about the company including statistics, blueprints, and client data requires top-notch security measures. One way to ensure its overall security is to use blockchain as a means to store these important data and share it only with a select few.
Unlike other storage devices which can be tampered with and mismanaged, blockchain uses the latest technological advancements available to help prevent third parties from extracting, tampering, or mismanaging certain data. Additionally, it isn’t vulnerable to physical external damages like overheated devices since they run purely on a network, ensuring that whatever data you plan to store will not become so easily lost.
In financial planning, it means that all your resources will be in one place that’s easily accessible yet hard to tamper with. Blockchain technology will allow you to quickly assess your current financial status.
Naming your goals for financial stability and growth
In creating your financial goals, make sure that you have a solid goal that’s specific, measured, actionable, reasonable, and trackable. Here are some ways to involve your financial planning with blockchain:
- Specific financial goals that involve realistic and measured results. For example, you want a decrease of 30% in your debts for the next 3 months.
- Make sure that your goals are actionable and reasonable or feasible. Don’t plan on making a million dollars in one day if the current money in your bank is less than ten dollars.
- Make sure that you track your budget spending and slowly eliminate the more wasteful expenditures. In tracking, one way that blockchain technology can greatly improve the relationship across different industries is that it provides an opportunity for tokenization. Since one cannot actually use real estate as a means of payment, one can still generate tokens which more or less serve to help improve the liquidity of certain assets, making it much easier to handle.
Blockchain technology can help you by creating automated software that can quickly track your progress. Aside from storing important information, programmers, engineers, and app developers can also benefit from blockchain technology especially if they’re working on a new project. If you’re working with expert financial planners, you can show them your plans. Considering that blockchain technology can be used as an open-source tool within a select few, developers can easily work on their new projects together on a shared network without worry of tampering or malicious data.
Developing an action plan for accomplishing financial goals
The most important step of financial planning is creating an action plan for your financial objectives. The action plan should consist of the current financial status like money owed, money saved, income stream, expenditures, and others. Blockchain technology can help action plans by being trackable and ensuring your money storages are secure.
Blockchain technology can improve security in a way that they can also be used to authenticate digital identities. In a world where fraudulent and malicious intent can run rampant in the industry, blockchain tech helps include more sophisticated means of security that goes beyond password-based systems and the like. One such example is its identity verification systems where a person’s identity can be authenticated using digital signatures, digital keys, and other irrefutable items that cannot be easily copied by third-party hackers.
Blockchain technology works as a decentralized digital ledger that records and stores the entire financial history of an asset in a secure and safe network. Between transactions, a consensus mechanism is applied to check the validity of the transactions between the two parties, which eliminates the need for authorized parties to do this task. As such, this results in a more secure and trustworthy relationship between investors and financial institutions.
You know that the data you’re keeping is secure as you work your way towards your target financial stability.
Many people often associate blockchain technology with cryptocurrency, which isn’t always the case. While cryptocurrency certainly has a role in the financial industry, investors who may be wary of this asset can still benefit from blockchain tech in other areas like smart contracts and a secure network for safer transactions.