We are going to talk today about how to create a financial plaN, to help you manage your finances more efficiently. There are actually quite a few ways to create a financial plan, based on your own financial situation. They can become very complex, or they actually could be very simple, depending on what your needs are. There is plenty of guidance online if you require it – for example this page is an excellent resource, packed with loads of helpful tips as well as interesting and readable news features on personal finance..
I’ll start with a simple process. Really, when you’re looking to create a financial plan, the first thing that you’re going to want to do, is to create a budget, and I know that, that sounds like it’s a painful process, and it is to a lot of people, but it really doesn’t have to be. A budget is a really important key part of creating a financial plan, because what it’s going to be telling you, is what amount of income today, you have coming in after taxes, what your expenses are, your fixed and your variable expenses are, including things that are unforeseen, like car repairs, gifts, camp for the kids, vacations, things like that, but what you’re really trying to get, is your bottom line.
You’re going to look at your income that’s coming in. You’re going to look at all of your expenses that you have, and you’re going to find out what your net is, and your net is going to be, hopefully, a number that’s in the black, meaning it’s going to be positive, so that after you’ve paid your expenses each month, you have money left over. If you find when you create a budget, that you have a negative number at the bottom, really the only two things that you can do, are to increase your income, or to decrease your expenses, but it’s going to be hard to create a solid financial plan, if you don’t have a positive number, or at least you’re at a break even. If you are not able to break even you will need to examine your outgoings carefully and eradicate high interest debts like credit card balances or payments due on a payday loans to firms like Omega Loans. But really, what you’re going to be doing, when you create a financial plan, is looking at what your financial goals are. It could be buying a car, in three years. It could be buying a home in five years. It could be sending your kids to college, in seventeen years, so they can be short, intermediate, or longterm goals, so really a financial plan is, all come down to creating a budget, that’s going to be a working budget for you, and that’s going to be positive, and that’s going to be attached to specific financial goals, that you would wish to accomplish.
The more complex side of creating a financial plan, goes much deeper. As people find that their situation gets a little bit more complex, a financial plan grows to encompass things like retirement planning, and making sure you’re saving enough today, to fund your retirement in the future. Estate planning needs, which can be living will, and a living trust, risk management, which includes all of your insurance coverage, your health, your medical, disability, property and casualty. It can also include tax planning. It can also take a look at investment planning, which is a key piece of your financial plan, what your portfolio looks like today. How to allocate it properly, how that might grow in the future, and then it all starts with still creating that budget, so as your situation gets more complex, there’s a lot more variables that come into play, creating a really solid, comprehensive financial plan, and to do that type of planning, I would highly recommend working with a certified financial planner.