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Making a new financial plan from the start of every year should be a new year resolution. Even if you couldn’t make one at the beginning of the year it’s never too late to make one in the middle of the year. And financial planning should be that decision you take seriously all through the year. However, making a sustainable financial plan is not that easy. You first need to understand where you are and where you are heading financially. You will have to take a personal money evaluation test to know if you’ve been good at managing your money. Or there is so much work on yourself to do. Whatever the case may be with a good financial plan you can give your life a new start and your finances a turnaround. Hence today you will be seeing a simple personal financial planning guide, that has helped me personally, helped others and is about to help you too. But first, let’s get a background understanding of some things.
What is Financial planning?
Financial planning is the process of making a financial plan. So the right question here would be…
What is a Financial plan?
A financial plan is a created road map for your finances be it for a long while or a short period of time. It’s a plan on what to do with your money and what not to do with it. These plans include the money you have, the money you don’t have and the strategy to get it. Strategies such as saving, paying off debt, and investing.
A financial plan doesn’t need to be done by a professional, you can do it but with a proper guide.
Types of financial planning
Knowing the different types of financial planning will help you out when making your financial plan. It will help you select the plan that fits where you’re at financially and will help you achieve your financial goals. So here they are.
Money flow planning
In simple words, this plan involves income and expenditure. How much you make and how much you spend. You just need to plan how you want your cash flow to be.
Such as living below your means, tracking your spending and making more money. Doing away with some money habits or making some lifestyle changes to be able to achieve a financial goal or attain some financial level.
Everything in this financial planning revolves around your money.
Insurance planning is very vital as this type of financial plan protects you and your family business and assets from unexpected events.
If you have no insurance at the moment is never too late to start making plans for that. If you own a house make sure it’s insured. And if you are a business owner make sure your business is insured.
This type of financial plan is to help you protect against things you can’t be in control of. Which when they happen will cost you a lot of money.
Investment is you making your money work for you and it is important for wealth growth and financial stability. Hence, having an investment plan is important.
Look at what you can invest in with a good survey and in-depth research. Then see how much money you can put into it. Slowly but consistently within a period of time.
Aren’t taxes overwhelming most of the time? Yes, they are. As long as you are a working citizen, owning one property or another you cannot escape it. Except if you are not a law-abiding citizen. Which I trust you are. Hence, you have to plan on how you will go about it the best way possible.
Real estate/housing planning
If you want to be financially stable in the nearest future a real estate plan should be on your financial goals.
It’s a good thing you can afford rent but it will be an amazing thing to own a house. What you pay on rent can give you a house in two years so you are actually spending a lot on housing you just haven’t calculated it yet.
Like any other financial plan, this takes time but is achievable within a short while if it is a top financial goal for you.
Do I need a financial planner?
You don’t have to be a certified financial planner to plan your finances even if you don’t feel confident about your financial planning. Plus whether or not you can afford a financial planner you can be your money manager.
So the answer is no, you don’t need a financial planner to be able to plan your finances. You just need to set a goal and come up with ways to implement it. Be consistent and disciplined to achieve those goals.
5 Personal financial planning guide you need
Now that you know the different types of financial planning that there is. You can choose the one that can achieve your financial goals for you and apply the guide you are about to learn
Hence, here is a simple personal financial planning guide in an order of where to start from.
Have a Financial goal
The first step to financial planning is having a financial goal or goals. Without goals, there won’t be anything to plan for. For instance, your goal is to get married/have a new job/move to a new city/ pay off a certain amount of debt by a certain period of time. Then you start making plans towards making your plans happen. And this is very applicable to your personal finance.
We often feel when it comes to setting goals they have to be something great or big. When the fact is goals don’t have to be massive for them to be valuable.
Hence, when it comes to setting financial goals it is advisable you start with small practical goals. Goals that won’t overwhelm you and leave you feeling like a failure if you don’t achieve them.
What are your financial goals?
As I said these goals are all the little things you want to achieve financially even if it doesn’t feel important. So here is what you are going to do to know what your goals are.
Make a list of them
Take out your journal or just a notepad and make a list of all the things you want to achieve financially. Big or small financial goals write them out. I won’t give examples so that everything you write on that list is inspired by what you want to truly achieve. The things unique to you only.
Rearrange according to priorities
After writing a list of your goals. Make a new list prioritizing your goals. Let me make this clear rearrange the list not according to importance but priorities. The reason is buying a house of your own is super important but settling that debt standing in your way of financial freedom should be a priority.
Once you have your list of concrete financial goals, the next is to draft a plan.
Make a Financial Plan
A plan is simply a written down strategy. The how of making things work. A procedure to follow that will give results.
Let’s use a financial goal to see how a plan should look like. And the goal would be to buy a house.
How a simple house buying plan should look like
* First is to choose how you plan on funding this goal. Everything finance is money centred, hence, how do I plan on getting the money for a new house.
* The next step will be how long will it take you to come up with the money that can buy the house of your dream or just a house. Depending on what you make or how you plan on funding this goal be reasonable with your time frame. Give yourself something like a three to ten years time frame.
* Once you get your time frame long achieving this goal can become impossible. You either lose focus, get overwhelmed or feel like you can’t do it.
* If you are choosing to save money then you set a saving plan according to your income. Then you work hard towards saving money monthly. Let’s say $1000 every month it could be more or less. By the end of the year, you would have saved between $10,000 to $12,000.
* You can decide to come up with a way to make extra money during that frame of time to put towards buying a house.
* Or go with a housing payment plan that will suit you.
This is just to give you an idea of how to go about it. Do your own financial research, get the right information and make your plans.
Implementation: Financial planning
This is the last and final personal financial planning guide. Which is the implementation stage. Literally, the financial planning stage, where you put your plan into action.
Where you start saving that money, tracking your spending, living below your means, making that extra income, paying off debt and changing your mindset.
It’s just about you doing all the practical things to see that in 3 years’ time you’ve bought that house or paid off that $100,000 loan.
Do you feel confident in your financial planning?
Whatever your response might be it doesn’t matter. As long as you wake up every day putting your plans into action you will do just fine even if you are not confident about your personal financial planning.
Having a better life doesn’t happen overnight and neither will your financial goal. All you need is a little bit of consistency, motivation from progress and the discipline to gain the financial freedom you dream of.
Be willing to learn and unlearn at this period. And even though you don’t need to be s certified financial planner to plan your finances. Always get professional advice where necessary.
So here is your simple personal financial planning guide.
Some tips during your financial planning journey
Making saving money a habit.
Develop a good money mindset and learn how money works.
Track your spending, if you use to be reckless with money do away with that habit. It is a bad money habit and will get you nowhere financially.
Adopt frugal living if you can. Living below means should be a common way of living especially your finances are not yet stable.
The best and fastest way to become financially free is to make more money. Hence, start thinking of ways to make extra money here and there. Or simple businesses to start that can make you lots of money.