Having a financial plan can help you to achieve your long and short term goals. It can prepare you for where you are now and help you get to where you want to be.
1. Set Goals
Before putting together your financial plan, you need to decide what you want your money to do. Once you set your goals it will be easy to create your financial plan.
Some questions you might ask yourself:
What school will I send my child to?
Do I want to start a college fund for my child?
What age do I want to retire at?
When can I pay off my debts?
After establishing your goals, you can start working out how to accomplish them and make your financial plan.
2. Start a budget
It is always good to start a budget to manage your finances, this will help you to achieve your goals. Managing your finances is one of the key steps to your financial plan.
Therefore, you need to start a budget. This is the most important step to your financial plan.
A budget will allow you to see exactly what you are spending your money on and allow you to cut back on unnecessary things, leaving you able to save. A budget can start you on the right path to a good financial plan. For more on how to start a budget click here.
3. Cut down on your expenses
Once you have your budget you will be able to identify your needs and your wants. You can then decide to cut down on unnecessary expenses and put the saved money away towards your financial plan. This way, you can redirect your spending to savings and put yourself on the right path to achieving your goals.
4. Emergency fund
This step is commonly ignored in most financial plans, but it is crucial to prepare your savings for a sudden, expensive emergency. Your emergency fund can be a savings account that represents your disposable cash. By having an emergency fund, you can avoid borrowing money in your times of need and are prepared for the worst.
The general rule of an emergency fund is enough cash to cover 3 to 6 months’ worth of living expenses.
5. Get out of debt
Paying off debt can be a burden each month increasing your expenses. The best way is to pay off your debt so that you can achieve financial freedom and better your financial plan.
There are many ways to get out of debt, Meerkat can help reduce your monthly repayments by up top 50% and take some stress off you while you are trying to become debt free.
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Retirement might seem far away for some people, but it can creep up on you, you need to be prepared. Even putting away a small amount each month can make a huge difference. If your financial situation improves you can decide to put more and more away each year and make your money grow.
A good idea is to contribute 15% of your salary and increasing the amount by 6% per annum (due to inflation) to your retirement fund each month.
Insurance is important as it can protect your financial assets. By having insurance, it can save you from many sticky financial situations. There are many types of insurance like car insurance, life insurance, health insurance and homeowner’s insurance.
If you were in a car accident, both car insurance and health insurance can protect your life and your finances. Once you understand the importance of protecting your financial assets, you’ll realise that insurance is a key part to your financial plan.
8. Set up your will
Financial planning doesn’t end when you die, you must consider your family and their financial future for when you pass away. You need to set up a will so that your family can distribute your assets.
Set aside some time to get an attorney and work out how you would like your assets to be distributed. You can change your will if your financial situation changes but having a base is always good in case of sudden unexpected death. This will allow you to take care of your loved ones when you are no longer able to.
Setting up a financial plan can seem difficult but by following these simple steps, you can create your financial plan easily. This will leave you on the path to financial freedom and a secure financial future.
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