After you have organized, assessed and budgeted for your current financial situation, it is time to develop a financial plan. This requires that you identify and write down future financial goals, such as saving for retirement, putting money away for a home purchase or paying off all credit card debt.
A written financial plan helps identify and clarify goals, increase income, reduce debt and manage your finances. Your plan does not need to be complicated. However, a financial plan does need to be monitored and re-evaluated on a regular basis. If you are not able to meet your original financial goals, you can always change your plan or adjust your goals. The important thing is to start taking steps now to get your finances under control.
Include the following steps as you develop your financial plan:
1. Start by asking yourself questions about your financial goals, such as:
2. Develop your financial plan by identifying long-term and short-term financial goals.
After you have considered where you want to be financially, both now and in the future, develop your financial plan based on those goals. Your financial plan should be based on your personal budget and individual needs, including income and debt management, family requirements, and goals for savings and retirement.
A financial plan uses both long-term and short-term goals to define how you realistically intend to reach financial success. Each of your goals should be measurable and state what is to be done and how much is to be achieved within a specific time. Keep a list of your goals to make it easy for you to update your financial plan as your needs change.
3. Use your financial plan to guide your current spending, saving and investing.
Review your financial plan and its specific long-term and short-term goals at least once or twice a year to make certain that your plan continues to address current needs. Revise your plan as often as necessary.
Managing Finances for the Future
Your financial plan can also be your guide for managing finances for the future. Managing finances includes rethinking spending options to reduce costs and giving you more money to put towards a productive and financially secure future. A budget can help you free up money to be saved or invested for use if there is an unexpected financial emergency.
Take the following steps to manage your finances for the future:
1. Identify the best ways to use your income.
An important part of financial management is deciding how to maximize the use of your income. Spending decisions may seem to be minor but could add up to hundreds or even thousands of dollars per year.
For example, spending $3.50 a day for a specialty coffee may not seem like a lot of money. However, you may be surprised to learn that this expense will add up to a total expenditure of $1,277.50 in one year. Spending $10.00 a day, five days a week, to eat lunches out, will cost you $2,600.00 per year.
Most people can find ways to spend their money more wisely. Look carefully at your daily choices to see where money may be draining out of your life. Start this process by separating your budgeted expense items in terms of:
If you think you have a lot of time to reach your financial goals and there are no financial stressors in your life at this time, you may decide that it is not necessary to change current spending habits. However, if you are like many people who have concerns about future financial needs, a close review of your current spending style may be very helpful in finding the best ways to use your money.
A written financial plan helps identify and clarify goals, increase income, reduce debt and manage your finances. Your plan does not need to be complicated. However, a financial plan does need to be monitored and re-evaluated on a regular basis. If you are not able to meet your original financial goals, you can always change your plan or adjust your goals. The important thing is to start taking steps now to get your finances under control.
Include the following steps as you develop your financial plan:
1. Start by asking yourself questions about your financial goals, such as:
- Where do you want to be in terms of your specific financial situation in the future?
- How much money will you need to reach your goals?
- How much time do you have to reach your financial goals?
- Where are you now in terms of financial security?
- What can be done now to improve the chances of reaching your financial goals on schedule?
- Are there certain financial goals that are a priority over other goals?
2. Develop your financial plan by identifying long-term and short-term financial goals.
After you have considered where you want to be financially, both now and in the future, develop your financial plan based on those goals. Your financial plan should be based on your personal budget and individual needs, including income and debt management, family requirements, and goals for savings and retirement.
A financial plan uses both long-term and short-term goals to define how you realistically intend to reach financial success. Each of your goals should be measurable and state what is to be done and how much is to be achieved within a specific time. Keep a list of your goals to make it easy for you to update your financial plan as your needs change.
- Long-term financial goals are the end-result goals that you want to achieve, usually within a period of three to five years. Start your plan by designating long-term financial goals that address the major areas of your life. The following are examples of long-term financial goals:
- To purchase a house in three years that has mortgage payments of no more than $1,200.00 per month.
- To pay off all credit card debt within three years.
- To have an annual income of at least $60,000 within five years.
- To retire at age 62 with a personal net worth of $600,000.
- Short-term financial goals are used to identify the more immediate steps that will have to be taken to reach your long-term goals. A short-term goal is often started immediately to be reached within a period of months to two years. The short-term goals should help you reach the long-term financial goals you have selected. Examples of short-term goals include:
- To increase personal savings by $100 per month by bringing lunch to work at least four days per week.
- To eliminate credit debt by no longer using credit cards, and by increasing payments to each of the credit companies by an additional $100 per month.
- To increase retirement savings by making deposits of a certain dollar amount to the retirement account twice a month.
3. Use your financial plan to guide your current spending, saving and investing.
Review your financial plan and its specific long-term and short-term goals at least once or twice a year to make certain that your plan continues to address current needs. Revise your plan as often as necessary.
Managing Finances for the Future
Your financial plan can also be your guide for managing finances for the future. Managing finances includes rethinking spending options to reduce costs and giving you more money to put towards a productive and financially secure future. A budget can help you free up money to be saved or invested for use if there is an unexpected financial emergency.
Take the following steps to manage your finances for the future:
1. Identify the best ways to use your income.
An important part of financial management is deciding how to maximize the use of your income. Spending decisions may seem to be minor but could add up to hundreds or even thousands of dollars per year.
For example, spending $3.50 a day for a specialty coffee may not seem like a lot of money. However, you may be surprised to learn that this expense will add up to a total expenditure of $1,277.50 in one year. Spending $10.00 a day, five days a week, to eat lunches out, will cost you $2,600.00 per year.
Most people can find ways to spend their money more wisely. Look carefully at your daily choices to see where money may be draining out of your life. Start this process by separating your budgeted expense items in terms of:
- Necessary expenses, including food and housing costs
- Discretionary expenses that are useful to your life but not necessary, such as some clothing and grooming costs
- Unnecessary expenses that are enjoyable but provide no real benefit, such as gourmet food and beverage items
If you think you have a lot of time to reach your financial goals and there are no financial stressors in your life at this time, you may decide that it is not necessary to change current spending habits. However, if you are like many people who have concerns about future financial needs, a close review of your current spending style may be very helpful in finding the best ways to use your money.
