Would you leave on a journey to a new destination without having a map of where you are going? What if your new destination is a successful financial future that leads to your financial freedom? Without having a map to guide you, would you know how to get there? Financial planning is a vital tool that provides a road map for a successful financial life. Financial planning can make the journey to financial freedom more fun, less stressful and more successful. You do not have to keep procrastinating, you can start right now, even if it means taking a few steps at a time. Here are a few guidelines on where to start.
1. Set Goals
First things first, you need to set your financial goals. After all, before embarking on any journey to a new destination you first need to know where it is you desire to go before you can decide how to get there. You can have short-term goals, for example, settling off a short-term loan within a specified period of time, or you can have some long term goals like seeing off your kids through college. Write all these goals in a paper including the timeline you want to achieve them. Keep on referring to that paper to act as motivation as you continue working hard towards your goals.
2. Where are You Now?
Next, you need to ask yourself this realistic question. You need to get a clear picture of where you are financially. List all your liabilities down; these are a list of things you owe and all your assets down. Assets are the value of everything you own. In addition, track the income you receive on a monthly basis and all your monthly expenses and note them in a notebook or a budget form. Don’t worry if the picture is not clear; financial planning will help you slowly improve the picture as you move on.
3. Avoid Potholes- Job Loss, Debt, and Taxes
It is unavoidable, at some point financial potholes will come your way. Losing a job, recession, wrecking a car or even paying hospital bills for a sick person. You may not be in a position to avoid these potholes, but you can put measures in place to minimize their financial impacts. Here are a few suggestions.
– Job Loss
You cannot control the company layoff or the economy at large, but you can invest your time in meeting people who can help you secure a job in future in the event that you lose your current one.
– Control Debts
Accumulating a lot of debts puts you in a risky situation financially. Try and start using a budget to mitigate your expenditure, if you spend more than you are earning.
There is good computer software that can help find deductions on the tax return. Though if you have a complex financial situation, you can benefit more by finding a financial professional to assist you with your taxes so as to avoid unnecessary penalties.
Financial planning has become a vital aspect of life today so that you can secure financial freedom in future. With an overwhelming number of options for investing and saving, it can be a difficult task to manage your finances. Financial planning will help you see the bigger picture and set both short-term and long-term goals in life.