In business, it is normal to have a financial plan. Objectives are set and it’s clear what they are looking to achieve from profits to company growth. However financial planning does not have to be limited to corporate affairs. Having a personal financial plan is an important part of your future and financial security. Planning ahead can help you to align your finances with your expectations. Think of it as your financial life map, if you follow it you will end up exactly where you want to be.
Having a financial plan will give you an answer to all the questions we ask ourselves when we think about our finances. Will I be able to buy a bigger home? Can I afford to travel? Will I be able to maintain my lifestyle when I retire? You can use your financial plan to answer all of these questions and it can give you a clear idea of the time it will take to achieve your aspirations.
Why Make A Financial Plan For The Future?
There are many reasons to create a financial plan and they may be personal to you however these are some important points to consider:
- Achieve goals
- Avoid debt
- Prepare for retirement
- Alleviates stress
- Provide for emergencies
- Accumulate wealth
A good financial plan will give you the confidence to achieve your goals in a measurable way. Often our ambitions in life seem totally out of reach. Your plan will clarify what you want and prioritise it in a way that is achievable. This not only helps you feel financially equipped it alleviates the stress that being unprepared can cause. You can feel safe in the knowledge that you are taking charge of your future.
Of course, circumstances change, and we won’t know everything at this stage but that’s the best thing about having a plan. It can be adapted and changed to suit us. Priorities can change and that’s ok, your plan will equip you with all you need to deal with any adjustments you need to make in life and help you to stay on the right track.
How to Make A Financial Plan For The Future
The first step to a solid financial plan is to determine your personal life goals. To break it down further think about your long- and short-term future. What is it that you want to achieve? Write them down, the visual aspect of having it on paper makes them more likely to come true. You can’t make a finance plan without specific endpoints. This will give it structure and a reason to follow it through. Maybe it’s your dream to build your own house or travel around the world or it could be something smaller whatever it is, make it personal to you and something you long to achieve.
Now you know what you want it’s time to establish what you can accomplish in your current circumstances. Research some online finance calculators or try out one of these budgeting apps to give you an idea of what you can afford. These can establish where your money is going and most importantly where you can make changes. A budget now will help you to determine the time it will take to reach each goal.
Family and Retirement
You may or may not have a family right now but if you see one in your future then it’s a good idea to factor them into your plan so you can provide for them later. Having children is expensive, you might need a bigger house one day and money for their education. Plan it all in advance so nothing takes you by surprise.
Whatever your age it is never too early to plan for your retirement. In today’s world, it’s more important than ever to ensure you have enough money to retire. With the advances in health care and medicine, we are now living longer lives. While this is a positive thing it does mean we need more financial stability for longer to maintain the lifestyles we have become accustomed to. You might have a bucket list of things you would like to do once you retire. Make sure you factor these in and consider things like inflation when determining how much you might need.
It’s not something we like to think about but having an estate plan is an essential part of your future. Hopefully, by following your financial plan, you will have accumulated some assets and wealth. Having a will in place will ensure that this is passed down to your loved ones and according to your wishes. It doesn’t have to be complicated take a look at wills online or speak with a company like E.L.M Legal Services who can advise and assist you when planning for your estate and make sure it fits in with your financial plan.
Use your budget to help you to clear any existing debts you may have. It’s best to do this first before you commit to your plan. It will make achieving your goals quicker and easier in the long run. It may take time but be patient and it will put you in a better position going forward.
Once you have paid off any outstanding debt and you have completed your budget it’s now time to start saving. Everyone knows it’s a responsible and important thing to do but, in a world, where we want it all now it’s so easy to put off. However, remember your goals, what is it you want t to achieve?
Nothing is too big or small, write them down and that way you have an aim. For example, you want to buy a bigger car in a year’s time, but you need a deposit. This is a realistic goal and one you can achieve if you follow your plan. Set up designated savings accounts with each specific target in mind. This will make it easy to track and allow you to work out what you can save for each one. You can tackle one goal at a time or maybe you would like to simultaneously save for several at once. Do what your budget allows and be realistic.
Be sure to include a rainy-day fund when saving. You never know what life may throw at you. Having an emergency fund will take the stress out of those times when things go wrong. It will help you to feel financially secure.
We can’t predict the future and so can only plan so much in advance. We may make mistakes and deviate from the plan now and again but don’t worry. Use it to remind you of your goals and bring yourself back in line with your aspirations and you will soon get back on track. Review your financial plan periodically as goalposts can change and your priorities may too. The plan is there to give you focus.
It’s a lot of work but it will pay off in the long term when you start ticking things off your list. You will feel proud and safe in the knowledge that you have your finances in order and you know what you need to do to achieve your short- and long-term goals. A plan will help you to develop good financial habits which is an important skill and a great one to pass on to your future family.