Everyone wants the security of a solid financial plan, but the majority of us don’t have one in place. Unless you’ve put together a formal strategy such as a written plan, it can be a struggle to accomplish any type of financial goal.
For those of you who are looking to get your finances in order, let’s look at some financial planning basics that can help you establish a financial plan.
Figure out your goals
This allows you to answer the important question, ‘What is my financial plan?’ Here you must decide what it is that you need your finances to do. Once established it’s just a matter of
creating a plan on how you’ll reach these goals.
For example, if you have children that may one day be attending university, you’ll need to save so you have money available to make this happen. Also consider the age you wish to retire, too, as this can help you to decide how much time you have to save, and then establish just how much you can realistically save in order to meet that goal.
Set up a budget
There’s no way of avoiding this when it comes to financial planning. Regardless of what your goal is, you’ll need extra money in order to make any of it a reality. A budget
will enable you to see exactly how much money to spend each month, your income,
and any cutbacks you need to make.
A budget enables you to put money away for major life events such weddings, the birth of a new child or a death. For example, you can begin planning for your funeral costings now and give your loved ones a helping hand. One suggestion is to find a funeral director in advance that can help your family out should you feel you’ve not been able to do enough before your passing.
Cutting expenses and budgeting go in hand. Here, you will identify the necessary expenses such as mortgage payments, bills, debts, insurance payments and taxes. These can be thought of as non-negotiable expenses.
The next category of expenses are those you have a little more control over. These include food shopping, utilities, work or school-related expenses, all of which are necessities
but allow you to have the ability to cut down on them if you wish. Remember, spend less than you earn.
Have an emergency fund
Once all of your important expenses are laid out, it’s time for you to save up for an emergency. Unfortunate events can occur and drain all your finances,
so instead, start saving and be prepared.
Monitor changing events
Your life’s financial plan is a document that needs to change and adapt as your life does. Think about what your plan was five or 10 years ago – a lot has probably changed since then. That’s why you should regularly monitor your plan and compare it to your evolving goals. Make small adjustments along the way and you’ll be able to see if everything is working out as you wished.
Follow our above tips and you will have a successful financial plan in place for life.