Financial Planning - Where to Start
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One of the best journeys to embark on in life is the financial
planning journey. The moment you decide to include financial plans into
your daily routine, you would have simplified the journey. It can be
very hard to start the financial journey but this journey could one day
lead you to a destination called financial freedom. Here are the six
best tips to help you plan for your finances accordingly and set a pace
for financial freedom;
1. Repay your debts - One of the key aspects that may easily impede
your financial plans is a personal debt, especially credit card debt.
The personal debt might start at a small level but it might soon grow
into a huge debt because you failed to reduce the debt on a regular
basis. Planning for your finances means you have a good plan and
settling your personal debts should be the first objective on the plan.
The key advantage of repaying and reducing your own debts is that it
allows you to save the money and invest for the future. In addition,
your living costs go down because you do not have further debt
repayments to undertake.
2. Start making investments - This is a crucial principle. Financial
planning means you are saving as you plan for the future; hence, you
will possibly use your current cash to purchase long term investments.
Some of the areas you could invest in are bonds, the stock exchange, and
many others. If you save your money with the help of financial
management and proper discipline, you will certainly be able to grow
your nest egg.
3. Set goals - Research shows that many people do not save because
they lack goals for their future. With no goals in place, nothing will
motivate you to defer current spending and save for a brighter future.
Take your time to create concrete goals, which could be a new car, a new
house, a vacation, or perhaps a change of career.
4. Spend less than your earnings - It is easy to understand this
principle but hard to implement it. This is because most people purchase
new stuff and want the greatest and latest phone, television set,
etcetera without pondering about the long-term repercussions. However,
if your expenditure exceeds your earnings, you cannot make head ways
financially. To add insult to injury, a large score of folks actually
spend more than their earnings and fund the same using personal debt.
This is not sustainable, at all. It will simply end up badly, which
brings us to the next tip.
5. Know where your earnings go - Many people struggle with budgeting
yet this is a crucial financial concept. If you do not know where the
money is going, you will hardly save. The moment you know how you spend
your income, you will be able to influence all your spending. You should
create a record of all incoming money and any expenditure. At first, it
can be hard to achieve this, but it will get simpler with time. It is
after you know where the money is going that you will be in a position
to make priorities in your expenditure and make sufficient savings for
your future.
6. Save before spending - Before you pay your normal bills, purchase
groceries, or carry out any other thing, set aside a portion of the
income. Do not forget the rule of thumb to pay yourself first. You can
start small by say setting aside 5 to 10 percent of your monthly
earnings. You can then raise your savings over time. Nonetheless, it is
important to know that savings are not adequate unless you channel them
into feasible investments.
Courtesy :
http://www.smartguy.com
