In good times and bad times, thick and thin, successful people always set goals. They recognize the importance of thinking ahead, and this always behooves them.
They will always make sure they follow through with their financial planning to the dot and won't make excuses.
Likewise, if you want financial security, the only way to achieve this is by having a good plan in place. The good news is that it is doable and pretty easy. Here is a simple step by step guide to help you do so.
Identify Where Your Money Goes
The most crucial step is to develop a budget, clearly stating how you usually spend your money. To keep track of your expenses, buy a small notebook that you can walk with everywhere you go. Remember to make notes of everything you buy. If you are tech-savvy, you could make use of downloadable personal finance apps that keep track of your spending.
At the end of the week, go through your notes, categorizing each of them. How much did you spend on transportation, housing, food, healthcare, mortgage, and entertainment? Consolidate all your notes at the end of the month. Do the same after the second and after the third one, then add everything up to the result. Do not worry about the expenses at this point; for now, focus on figuring out where your money is going.
Set Financial Goals
Ask yourself where you see yourself ten years down the road. Generic answers like I want to be rich should be avoided. Be specific: “I want to have paid half my mortgage,” or, “I want a side fund to help my kids go to college.” Be realistic and specific.
Your aim is to succeed and not fail, and you can only achieve this if you are true to yourself.
Get Insurance
Always prepare yourself for the unexpected with insurance. If you do not have a family yet, buy yourself disability insurance. This will protect your earning power. On the other hand, if you have a family, ensure you purchase life insurance to protect all your loved ones.
Auto coverage, health, renter’s insurance, and homeowner’s insurance are all essential. Regardless of your financial situation, getting insurance coverage will give you backup in case you are financially not doing well.
Keep Track of Your Credit
You can never get anywhere without good credit. Set a time once a year to check your score with any of these credit agencies.
- Equifax
- Experian
- TransUnion
Remember to also ask for free copies of these reports per year. Ensure there are no inconsistencies between credit reports and your records. In case of errors, immediately dispute them with the agency reporting them. You can find instructions on their website.
Start Saving
We can never emphasize this enough. The key to any successful saving plan is to put money into your account. This means keeping an eye on your expenses rather than your paycheck. Lots of people earning high wages still outspend their income.
This happens every day, but if you are in control of your outgoing money, it doesn’t matter how much you are earning; it will still be more than enough.
You can decide to save 10%-20% of your income, but whatever the case, do not be too harsh on yourself. The goal here is to save until you have at least three months’ worth of income in your savings account. If an emergency arises, forcing you to use this money, do not feel guilty. This is what it was meant for anyway. Just make sure you replace it as soon as possible.
Conclusion
Financial planning takes time and effort. It cannot be done within one day. No amount of preparation can predict the results you want; however, instead, you plan so you're protected when things go wrong. Build your portfolio, keep track of your financial plan, and plan your existing strategies. For more financial advice, visit the rest of our website.
