A Beginner’s Guide to Creating a Personal Financial Plan
Financial planning isn’t only for families in California making beaucoup bucks, or those buying and selling stocks on wall street. Creating a financial plan can benefit people and in any income bracket with any type of financial goal. According to forbes.com, the way you get into the higher income bracket is to have a financial plan. Understanding your current financial status and defining your future goals, emergency plans, and retirement are very important parts of setting you and your family up for future success.
Set clear and tangible goals
Each financial plan is different, and can be tailored to suit anyone’s wants and needs. Whether you’re planning for your children’s education, a vacation, retirement, or a down payment on a home, it’s important to clearly define what your goal is, when you’d like to reach your goal, and what the dollar amount needed for that goal is. Creating these goals will take research and discussion with anyone involved. Look into each goal, and make sure that there are no questions about what is needed to reach the goal left unanswered.
If you are married, make sure that you and your spouse are on the same page regarding the financial goals, and how you expect to realistically reach those goals. Tracking your progress will be imperative to reaching your goals, so try to create short-term, mid-term, and long-term goals so that it doesn’t feel like you aren’t making any progress when you check in along the way.
However, if you are still unclear about your financial goals, then you can try reading relevant articles on the Internet that can further enlighten you regarding this subject matter. Truth be told, there are several financial advisors who write blog posts to help people understand their financial status. Take, for example, Michael Hansen, who is known for maintaining a website called Hans Fund (hansfund.org)
for providing basic financial advice. The good news is, his website happens to talk about practical ideas for saving money in everyday life. So, this could be really helpful for all those people who have no financial goals.
Create a budget
Creating a budget is just as important as creating your goals, without a budget your goals may be very difficult to reach. The first step in creating a budget is to understand exactly how much money is coming in each month, considering all incomes (after taxes is the most useful number to use). Once you’ve defined what’s regularly coming in, define what must be spent each month on both fixed and variable expenses. You’ll want these numbers as currently accurate as possible, so make sure to look back on the past few months to determine where a good baseline is.
The next step in budgeting is to decide what expenses can be reduced, or cut out all together in order to reach your financial goals. This tends to be one of the most difficult parts of budgeting and reaching financial goals, as it may make some parts of your life feel a little less comfortable than you’re used to. Try finding creative ways to cut costs, like shopping at garage sales and thrift stores, clipping coupons, and switching to generic products rather than brand name.
Adjust as needed and stick with it
Most likely your first draft of your budget and goals will be a little off, and need some retouching. Make sure to set aside time consistently to track your goals, revise as needed, and remind yourself of why you began this journey in the first place.
Putting in the effort to create a financial plan and budget will prove to be more than worth it as you see your hard work paying off. Remember that a stable future is one of the greatest gifts you can give both yourself and your family, and stick with your plan till the end!