Create your financial plan
Setting personal & Financial goals for yourself is an important and crucial Start of moving forward and can often used to measure success.
However, simply setting goals does not ensure you will someday accomplish them. Achieving goals requires establishing a plan. Planning is important to ensure a direction for your day-to-day actions. Being deliberate about establishing a plan can help guide the decisions you make to aid you in reaching your goals.
The further your goals are from today, the more important it is to have a plan to ensure your success in reaching those goals. Think about it. You may not consult a map for a trip to the store across town, but you will probably want
directions, or a plan, for a spring break trip to California.
When it comes to personal financial goals, many can be long term. Paying off student loans, a new car, or a mortgage on a home does not happen in a month or even a year. Retirement is an even longer term goal. When it comes to financial matters, planning can be of paramount importance.
That being said, when coming to start building your plan, it is very important to work with a system that will ensure your plan will include all the relevant elements that are needed in order to get you on your way.
Your Financial plan should describe in simple terms your current financial situation, including debt, liabilities, expenses and assets – we call this part: ‘Where we are now‘. the idea is that we take a long hard look at everything we have at the current moment of making the plan and understand our starting point, its advantages and disadvantages. another step in the first part of the plan is understanding our financial goals and what we want to achieve.
The second part of the financial plan should concentrate on what it is that we are doing wrong, or, what can we do different – our actions, our behavior – – personal & financial – this is the place to try and understand what it is we want need to change in order to achieve what we want. we will call this part: ‘What we should change‘.
The third part of the financial plan, and maybe the most important part, is to describe what we are willing to do in order to achieve our goals – what kind of activities, work, savings, investments, life changes and priorities we need in order to complete the goals we set out to do. we will call this part: ‘what are we going to do‘.
each part of our financial plan can be divided to 2 smaller basic steps:
1. Determine your current financial situation
2. Develop your financial goals
2nd part – What we should change
3. Identify alternative courses of action
4. Evaluate alternatives
5. Create and implement your financial action plan
6. Review and revise the financial plan
It is never too early to begin planning.
In fact, the earlier you begin planning for your financial future, the sooner you will reach your goals. Because of the nature of interest and compounding that can be associated with investing, starting early can have great benefits. The longer your investments have to grow, the greater their growth will be. For instance, if you invest $5,000 today and receive a 6% annual compounding interest rate, your investment will grow to approximately $10,000 within 12 years. Within 24 years, the $5,000 investment would grow to $20,000 and within 36 years to $40,000. While a $5,000 investment at that rate made at age 48 would only grow to $10,000 by age 60, the same investment made at age 24 would grow to four times that value by the same age.
As you can see, it can certainly be advantageous to get started planning for your financial future as early as possible.
You have to be intentional about creating a plan and diligent in executing it. After all, directions to your spring break destination won’t do much good unless you follow them.