Money Planning 101: What is a Financial Plan and How Can I Create One?
To create an effective plan of action of any kind, we must first pause to observe where we are currently before considering where we would like to go next. Great planning needs honest reflection. Navigating finances can be daunting if you have not been used to dealing with them as and when change occurs. Reactive financial management is rarely successful. It does not allow for space for the kind of ingenuity that leads to both short and long term success.
Financial planning can powerfully transform them in positive ways no matter what state of health your banking affairs are currently in. However, even if you are presently economically comfortable, this does not mean that you can not evolve your situation. Further to this, none of us can know for sure when a financial crisis might occur. Therefore, having a solid plan in place can save you from a significant amount of stress, anxiety and heartache later down the line.
What does a financial plan look like?
Tailored, accurate financial plans aim to incorporate every influential factor within the specific situation it relates to. A financial plan is essentially a roadmap with every turn and street name labelled clearly to ensure more effective navigation. It is a fully comprehensive image of your current finances, economic goals and any strategies that you might have in mind at present. These are the building blocks of any financial plan.
Further details also include (although are not limited to) cash flow, savings amounts, current and past investments, liabilities, insurance, and specific details of any outstanding debts that remain. It can feel a little scary to look so bluntly at every area of your money situation. For those who have struggled with economic crisis or significant debt in the past, it might feel like a trigger of trauma somehow. However, you will soon find that it is an empowering experience to take the lead!
There are various apps and online tools that can help you to gather the details you need about your incomings, outgoings and other relevant information. You might find that some work better than others for you, so do not be afraid to experiment a little. Many of these tools are free of charge to download and utilise. For example, you might find that your bank now offers a web or app-based tool that can help you streamline your financial details also.
Okay, this all sounds good— how do I go ahead and get started?
- Know where you’re going. Visualise where you would like to arrive in the future. What are your goals? What do you plan to achieve for yourself or your family? Are there any upcoming expenditures (such as marital plans or launching a new business venture) that will require significant funds to support them? What about in 10 years—do you still plan to be working? If so, where will this be, and how much do you intend to be earning? These kinds of self-discovery questions will help you map out your roadmap.
- Tidy up the holes in your financial affairs. There is no amount of inspirational motivation that can counterbalance a financial portfolio with gaps in it. For example, suppose you have not sensibly organised debt repayments. In that case, you might be throwing vital funds at unnecessary charges or payment plans that are not feasible for your situation. Tackling high-interest debt is essential to your economic success. Consider options such as a consolidation plan that could free you to achieve your goals more quickly.
- Make your money grow. There are two ways to help your financial health to thrive. One is to utilise an excellent savings plan that will help you stack up cash quickly. It may take some sacrifices, but you will soon reap the worthy rewards of your efforts. The second is to help your money to multiply through smart investments. No matter how wealthy you might (or might not) be, there are options available to you. Despite the rumours, being an investor is not just a rich person’s game but can provide vast returns when done right.
- Build yourself a robust money moat. Throwing all of your hard-earned cash into one venture is not wise, no matter how attractive the opportunity might be. Great financial planning is all about expanding your chances of success and security. Furnishing an emergency fund and paying into a retirement plan are great examples of wise financial decision making. Investing in some great insurance is also a smart move to protect you from the loss dangers of medical emergencies or similar catastrophes.
I’m excited to get started—is there anything else I need to know?
One of the best investments you can make for the sake of your personal and financial health is to enlist the support services of a qualified expert. Trained advisors are skilled in creating financial plans that help you to achieve your ambitions and reach your money goals at the exact pace that is right for you. In addition, they can make insightful suggestions that you may not have considered while providing invaluable personal support as you gain confidence in your abilities to make your money grow.
Your financial plans can cover several years at a time or one month at a time. Create the kind of plans that excites and inspires you. Use the knowledge you already have in powerful combination with the recommendations of a financial expert to achieve the most efficiency in your future ventures. Your journey is unique, and you are free to take the paths that feel right for you and your finances. Creating a detailed financial plan (or several) will only take you higher!
