28.11.2020

How to Make a Financial Plan in 5 Easy Steps

Creating a financial plan helps you write down the great vision of how much money you need to live your life the way you want. It also helps you identify what you need to do to get there.

When you have a financial plan, it is easier to make decisions about your assets, make changes, and stay on track to reach your goals. Think of it as a compass to reach your financial independence.

This process requires an integrated approach at all stages of financial planning. All with the general economic and predictable perspectives This approach should be inspired by the principles of prudent management that do not jeopardize your personal financial health. However, personal limitations and objectives must be legitimate and realistic.

The most important thing before starting, if you don’t know anything about financial planning, is to train a little. Really, it’s up to you to develop your own personal finance education. The good news is that in order to educate yourself, you don’t have to go to college or spend large amounts of money.

It is never too early or too late to start learning and at the same time, plan your financial future. But, when it comes to financial planning, we all have different goals and objectives.

In addition to learning the basics, be guided by these five steps, and you can begin to lay the foundations for a solid financial future.

Step 1: Define your goals

You have all kinds of projects, and your friends discover that you always do them. This is good news. You have learned to set goals and take concrete steps to achieve them. This is also the case with financial projects.

It is important to set realistic financial goals, but it is also important to dream a little. Try to classify your goals in order of importance and set reasonable times to finish them.

Here are some examples of personal financial goals that are often identified:

• Pay for expenses related to the education of a child in one year.
• Pay a high-interest credit card in a year and a half.
• Create savings for contingencies in 2 years. (Try to build three to six months of savings, so you’re prepared in case you lost your job or illness.)

Step 2: Analyze your income and expenses

Income
• It is essential to know exactly how much money you earn And not only your gross salary but the real income after taxes you take home.
Expenses
• Mortgage and/or rental payments.
• Household supplies, internet, and telephone bills.
• Insurance premiums
• Grocery bills
•Medical expenses
• Entertainment expense
• Cost of operation and maintenance of the car

Step 3: Plan how you will achieve these goals

You may have to get a second part-time job. Maybe you can cut some expenses, for example, stop eating out on Saturdays or unsubscribe from a magazine, remove all unnecessary expenses, etc.

Step 4: Start implementing your plan

Achieving your financial goals requires implementing the goals you developed in Step 1. The key to the success of the goal is the following: set a goal and then translate that intention into action. An objective is the desired result. When you set your goals, you gave yourself instructions to perform certain behaviors in order to achieve the desired result. Therefore, implementing is essential to achieve your goals.

Step 5 Periodically review your goals.

Financial planning is an ongoing process. The golden rule is to return regularly to your goals and adjust your plan as you progress with the changes in your life. Do periodic reviews, evaluate your financial progress, and make the necessary changes.