Let’s face it, we all want a solid financial plan that can help us manage and grow our income. But, in reality, not everyone actually has one. It’s not that we can’t set financial goals or come up with effective strategies for ourselves, but because it’s hard to have that discipline or commitment needed to follow our plans to a tee.
So here’s an easy-to-follow guide on how to get started.
Set clear and realistic financial goals
The best way to start a financial plan, whether you’re working on it on your own or with the help of a financial planner, is to set clear and realistic goals.
Begin with the end in mind, and ask yourself, “What do I want my money to do for me?” It’s a general question that can give you a boost on getting yourself on the right track of determining your short-, mid-, and long-term wants and needs.
Try to envision where you want to be in life years or decades ahead to get a better idea of the things you might have to spend on in the future, so that you can save for them now.
Do I want a house? Do I want a car? Do I want to start a family?
Then, ask yourself when do you want them. Your time frame has to, of course, be relative to the size of your income to be realistic.
For example, if you want a condo unit in 5 years, think about the following:
- What condo unit size is right for me?
- Where is my preferred location?
- Which developer do I want to have the business transaction with?
- How much inflation should I factor in?
You need to take all these little details into consideration when you’re working through your plan as it provides you a concrete roadmap that you can follow. This gives you some direction of sorts to increasing your savings, earning more from your income, and getting you closer to your ideal life.
Create a strategy
Now that you have your financial goals, you’ll have to figure out strategies to accomplish them. There are different ways to do so, ranging from do-it-yourself solutions, such as cutting on your expenses and reworking your budget, to technical options like investment references, life insurance, and time deposits.
For the most effective strategies, consult with a professional in financial advisory as they’re trained and licensed to give you the best advice. They’re able to analyze your goals and set up suitable programs for you.
Build an emergency fund
One of the most crucial parts of any financial plan is an emergency fund. It serves as a safety net in case of unforeseen events such as loss of a job, an illness, or any other costly risks.
You can start building this fund by simply putting a certain amount of what you earn monthly towards it. It doesn’t really matter where you put your money just as long as it’s readily accessible when the time comes that you’ll be needing it.
With regards to the amount you need to save, a good of rule of thumb is:
- 3 months’ worth of your monthly income is like living on the edge
- 6 months’ worth is for short-term
- 12 months’ worth affords you some confidence in case you lose your source of income, be it your job or your business
Commit to your plan
The success of your financial plan ultimately depends on you. It won’t be easy sacrificing some of your expenses or resisting the urge to spend on things you enjoy. But it’s completely doable if you’re really committed to your goals.
Always set your sights on what you want for yourself in the future and try to avoid getting sidetracked. You might make mistakes along the way, but that’s just part of the journey. What’s important is you pursue your financial plan to fruition no matter what.
Remember, your commitment is not to your financial planner or to your program. Your commitment is to your future self.
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