Regardless of whether you team up with your partner or go it alone the path to financial independence is not always a smooth, perfectly paved one but it’s time to roll our sleeves up and get our hands dirty i.e time to learn how to create a solid financial plan. Financial planning is a step to step approach to meet one’s life goals and helps you be in control of your income, expenses and investments such that you can manage your money, achieve your goals and make the most of your assets. It’s not just for the wealthy but creating a road map for your financial future is for everyone.
Some of the ways of building a solid financial plan include:
Write down your financial goals.
A good financial plan is guided by the financial goals set. If you approach your financial planning from the standpoint of what your money can do for you, you’ll make saving feel more intentional. This should be looked at from a point of where do you want to be in the next 5 years, 10 years or 20 years to come and they should be well defined and prioritized accordingly. This will inspire you to complete the next steps and provide a guiding light as you work to make those aims a reality.
Create a financial plan to invest.
Before putting your money into investments, it’s important to have well defined objectives and think about what the investment is for and when you’ll need your money and what’s your risk tolerance. Investment is buying an asset to generate returns from it over a period of time while also taking care of risk and volatility. You can make an investment for short-term, medium term and long-term and select the appropriate instrument as per your planning as you focus on factors like risk return, tenure, tax and liquidity.
Start an emergency fund.
We do not live in a world where we take each day as it comes. Financial emergency may arise at any time and putting cash away for emergency expense is necessary.
It may be possible to save without having a financial plan but it may not be the most efficient way to go about it. Saving is just a way of restricting your expenses and keeping the unspend money in your own custody for the purpose of accumulating it. This helps to maintain liquidity and to meet future expenses easily. The best way to save is to figure out ways in which you can curtail expenses i.e ensure your income exceeds the expenses with a wider margin and the surplus fund after meeting all the expenses will be your savings.
Stay the course and avoid overspending.
Pursuing a goal of financial independence that’s very much tied to delayed gratification is not always easy but it’s doable. Have a solid plan for your finances, be disciplined and avoid overspending and you’ll find out how great you’ll feel when you really make a concerted effort to stick to your budget.
So having a solid financial plan will reduce your stress about money, support your current need and helps you have a proper plan for your long term goals like retirement.