The correct attitude to money and the organization of financial flows can help to achieve the goals that you dream about. One of the most important ways to achieve economic literacy is to draw up a personal financial plan. This article contains step-by-step instructions, as well as tips and some examples.
Converting a dream into an achievable goal.
Dreaming, as they say, is not harmful. But if the goal is to realize a dream, then it must at least be achievable. It makes no sense to think about a yacht and a mansion, receiving an average salary for the region and not having any additional income or resources.
The first step is to clearly formulate the goal and put it into words. This should be a precise definition of the amounts and terms.
It is useful to make a list of goals on paper, analyze the need to achieve each of them, and then formulate deadlines for each – this can be a deadline for achieving the goal or a long one – using a certain accumulated amount for a certain time. The final required amount is important – starting from it and the term, it will be possible to find out how much you need to take out of your monthly income and save it.
Determine the exact amount of income.
The total income is summed up from three sources:
1. salary – you can increase it by taking on additional responsibilities, changing jobs, or finding additional work to the existing one;
2. state benefits and tax refunds – it is worth familiarizing yourself with the laws, in some cases it is possible to return the paid tax, a percentage of the cost of treatment, or a percentage of the investment;
3. Assets – by wisely investing in securities, stocks or real estate, you can get money without any effort. Of course, it will take time and effort to figure out where it is better to invest, but you can use a ready-made investment strategy.
So, in seeking to increase income, you can use different methods, not just looking for a job with a higher salary.
Decide on costs.
Standard and recurring costs can also be divided into several areas:
1. utilities, transportation, food, recreation and health. Of all the above, only rest and transport lend themselves to adjustment, the rest is vital in full;
2. spending on assets. Payment for bank accounts, renovation of additional living space intended for delivery, brokerage services. There is something to squeeze, but it should be borne in mind that reducing investment in assets can automatically reduce passive income. You need to look for a middle ground;
3. debt to the state – taxes and fines. With taxes, you can try to come up with something, consulting a lawyer will help you find possible relief. And fines can be avoided if you have a specialist who will help you to avoid violations with advice, and personal violations are already a personal matter of everyone’s conscience;
4. loans. Of course, it’s good when they are not. But if there is, then you can ask for refinancing at a lower rate. This will increase the overall overpayment, but will provide relief in the current time.
Protecting the plan.
Unforeseen situations often happen in life, therefore it is important to think over the protection of the financial plan from such events. It can be a cash cushion of three monthly incomes or more. The best option would be to invest this money in conservative financial instruments. Buying insurance for high-value assets in an emergency will give you the opportunity to swim out. Assess the profitability of assets and get rid of those that require more investments than profit.
With an action plan in hand, it is important to follow it. Therefore, when receiving money, you need to immediately distribute it according to the list of priorities. And the remaining free money, if there is no desire to accelerate the achievement of the goal, can be spent on pleasure. Thus, moving towards the goal, your quality of life will not suffer, and this will avoid financial disruptions.
It is for confidence in tomorrow’s financial position that it is necessary to draw up a financial plan. It helps you stay on course and frees you from holding all the necessary tasks and payments in your head.