You’ve probably heard lots of advice about how you need a financial plan for your future so that you can retire with a healthy bank account. But have you listened to that advice and started investing? If not, it’s time to get started.
Many people avoid investing because they think a professional financial planner. And most of people don’t want to spend the time or money to hire someone.
But, if you do your research, the only person you really need is you. A financial plan is not as complicated as you might think; you can create one on your own.
In basic terms, a financial plan should include your current and future financial situations and a plan for getting from one to the other based on your income, expenses, and any assets you have. Here’s how to get started:
Know your current status
Create a list of your income streams, monthly expenses, and current assets to get a clear understanding of where you are and what you can expect to have for the future. Review your annual budget and the most current credit card and bank statements to get the big picture of your debts, income, and monthly expenses.
Plan for the future
It’s hard to know what the future will hold, but you’ll need to make a plan based on what you expect to happen. Sit down with your spouse or a friend and talk about your financial goals. It always helps to have someone to talk about these things with and bounce ideas off.
As you’re creating your plan, work toward 5-, 10-, and 15-year goals to start. What do you want financial picture to look like at these marks? For instance, if you’re planning on buying a home in 5 years, you can start making a plan now to save for the down payment.
Mapping it out
Once you know where you are and where you want to be, the hard part is done. Now it’s time to do some math and make a plan. Your plan needs to include the financial goals you’ve set for yourself and how much you will need to reach these goals so you can lay out your map.
What are some small financial steps you can take to reach your goals? Determine how much you need to set aside each month to reach your 5-10 year goals. Follow this same step for all your future financial planning. Be sure to calculate about 5-8% a year for inflation.
Now you’re able to make smart choices about your spending and saving habits based on your goals and your financial plan.
Review the plan yearly
Make time to review your plan each year as your goals, income, expenses, and assets may change. The numbers you used last year may no longer be current. Your plan may need to be adjusted to account for these changes.
Having a plan for your future is important so that you make informed decisions about how you spend and invest your money. Without a plan, you’re just hoping for the best and you’re not able to make good decisions that will benefit you in the long run.
Like Us? Sign Up!
Subscribe to get the updates from The Free Financial Advisor.