The people who are successful at setting goals and achieving them, at least financially, are the ones who create a financial plan and follow it. In fact, if you want financial security, having a good plan is the only way to achieve it. The good news is that it is not difficult to create one. Here you have seven simple steps to develop your financial plan and strategy.
Step 1: Find out where your money is going
The first and most important step in creating a financial plan is to develop a budget detailing where your money goes. A piece of lifelong advice is to get a notebook small enough to fit in a pocket or bag and take it wherever you go, but since we are immersed in the digital age, a mobile app is better to control all your expenses. Every time you spend money, take note.
At the end of the week, spend half an hour going through your notes and classifying them. How much did you spend on food? In the transport? About housing, clothing, entertainment, health care, rent, mortgage and utilities? At the end of a month, consolidate those notes. At the end of the next month, do the same thing, and at the end of three months, add it all up and spend some study time on the result.
The job at hand is not to identify, let alone get rid of guilty pleasures. The job is just figuring out where your money is going.
It is also important to do this exercise for at least three or four months. Capture all the expenses you make, including the ones you don’t make every month, for example car repairs.
Step 2: Set financial goals
Now ask yourself a simple question: “Where do I want to be in 20 years?” and avoid responses like “I want to be rich.” Respond with more specific things: “I want to have a house with a mortgage that is half paid off, and I want to have a $500,000 investment portfolio plus a secondary fund for half that to help my kids get a college degree.” Be realistic when setting your goals and be specific.
Step 3: Prepare for the unexpected with insurance
Do you have family? Otherwise, buy insurance to protect your purchasing power. If you have a family, you’ll want coverage and lots of life insurance to protect your loved ones. Adequate health insurance, auto coverage, and homeowners or renters insurance are also important. No matter your financial situation, insure against the unexpected, something that can help keep you on the right track in case accidents create a financial burden.
Step 4: Start saving
This is where the guilty pleasures they return to the scene. The key to any savings plan is not income but spending. This means worrying about expenses, not just a paycheck. Even if you have a high salary, you can spend more than you earn: many people do. But if you control your output, on the other hand, it doesn’t matter how much you bring home, because it will be more than enough.
After looking at your list of expenses, determine where you might be spending too much. Are you splurging on entertainment? What about car payments, vacations, or food?
Look for ways to save but without being too blunt. your goal It is not to eliminate the pleasures but to control them so you can free up some of the income, say 10%, for a savings plan.
Step 5: Build a portfolio
After saving enough for an emergency fund, you should start investing in extra cash. For new and experienced investors, the easiest way to start building a portfolio is with investment funds. For one thing, you can find funds that match your particular risk tolerance. On the other hand, they spread your investment risk. Last but not least, mutual funds give you professional money management, a great idea if you don’t have the time or experience to go it alone.
Step 6: Keep track of your plan
Manage your financial plan, in part with an annual checkup to make sure it remains consistent with your personal situation. Have your goals changed? What about your income, debts, family needs, health? How have your investments performed? More importantly, have they worked as expected?
Depending on the circumstances, it may make sense review your plan semi-annually, even quarterly. However, if you do, don’t confuse long-term goals with short-term ups and downs in your personal situation, that is, don’t rush to change the plan.
Step 7: Plan your exit strategies
Plan an exit strategy that matches each financial goal in your plan. If, for example, you want to buy that 1,000-square-foot house in ten years, you’ll probably need to free up some of your wallet at that point to get the job done. Likewise, if you expect to need college money for two kids, you’ll also need an exit strategy for that money.
The investment answer: Creating a financial plan requires some work, as you can see. And no planning can guarantee the 100% expected result, but planning is better than the alternative, that is, not planning. These same plans can be applied in companies, something very necessary in today’s business. If you want to learn how to do it, you can’t miss the
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