A financial plan is like a road map that helps you in achieving your financial goals. It is a process that can help you improve your financial decisions and make the most of your income. It is best to work on your personal financial plan at an early age so you can adopt the habit of saving for the future and succeed at it. Everyone wishes to retire with a wealth they can live off comfortably and, making that wealth should be part of your financial plan. Here are a few steps that can help you secure your future.
Step 1 – Set your financial goals
Write down the long-term goals you would like to achieve, analyze how much money you will need to achieve those goals. Writing all of it down can help you have a clear mind about your future steps and strategies. Make sure you use the SMART Strategy when setting up your financial goals.
S – Specific
M – Measurable
A – Attainable
R – Relevant
T – Time-bound
This will help you keep a check on your directions towards your financial goal and, you can keep reviewing and updating them as required. Make sure you keep your needs separate from your wants when setting up your financial plan. You can also get help from retirement planning professionals to set up a foolproof financial plan.
Step 2 – Analyse your Money
Once you know what you want to do when you retire and how much do you need to retire, look at your current situation. Analyze your income streams and your expenditures, consider every expense, asset and liability. Take a deep dive into all your outgoings, from your groceries to your Netflix subscription. Take a look at your bimonthly/yearly bank statement and mark the regular and irregular expenses. See which of these expenses you can cut down on and how much you can save yearly from just canceling a few subscriptions. You can seek advice from professionals who will guide you towards the loopholes that can help you analyze your income and match it with your projected goals.
Step 3 – Establish strategies to reach your goal
The next step in creating a perfect financial plan is establishing a few strategies for successfully attaining your long-term objective. If you have a consistent salary, you need to mark how much you need to save every month/year to reach your financial goals by the time you retire. If that is not enough, you need to create a few long-term revenue streams to grow your money through investments. You may also need to consider your risk tolerance in case an unforeseen emergency arises. Set up a separate savings account with a certain amount of money generated from various income streams.
Step 4 – Manage your Debt
You certainly would not want to have a debt hanging on to you as you are securing your future. Keep your loan repayment plan in mind when making a personal financial plan. You can either pay off the debt first and then think of the future or manage your debt along with saving up for the future. Take into account the interest rates, credit card fees, or student debt, if any. Create a balance sheet and attain the right amount of balance to be paid in managing your debt in your financial plan.
Step 5 – Protect your Money
All the financial planning in the world can’t save you if there is no money set aside for emergencies. Unforeseen circumstances like accidents, losing a job, or getting sued can quickly eat up your savings. Think smartly instead of waiting for anything to happen. Make sure to set up a fund for a rainy day, put an amount away for emergencies or consider cheap loans before taking anything from your savings account. Try to keep your credit history positive throughout, so you can get loans and mortgages when you need them. Seeking advice from a professional financial advisor beforehand will also assure you have an umbrella for a sudden storm.
Step 6 – Create an Estate plan
Most people won’t think of this until just before retirement or at a very late stage of life. There is no right time to write a will, but the earlier you make such decisions, the better. It means you decide who will be making your financial decisions when you are unable to make them. You can secure your assets by making someone you trust have power of attorney. It’s always best to seek advice from professionals who can guide you in creating an estate plan depending on your wealth and assets.
Step 7 – Get help from a professional financial advisor
Managing your finances and setting up a personal financial plan to perfection may sound easy, but seeking the help of a professional is always a better idea. Professional financial planners can analyze and set up an entire financial plan as per your retirement goal. With exceptional knowledge of various financial products and different approaches, they help you decide how much you need to save to secure your future.
There is no template for a perfect financial plan, but the best way to secure your future is to make adjustments right away. Don’t just rely on the 401k or dividends from stocks as you decide to retire. Secure your retirement goal with the plan that suits you best right now. Don’t wait to earn six figures or have an inheritance to make a financial plan. Make sure you know what you want your future to look like and, it will inspire you to make adjustments.