One of the most basic and true concepts in life is that money makes the world go round. While there are people that live off-grid and avoid mainstream culture, most people need money to survive. You spend a staggering amount of money on living costs. For many, this is more than they earn and the only option appears to be to turn to credit.
But, you don’t have to! Instead, take the time to implement the following financial planning steps and take control of your finances. It doesn’t matter what situation you’re currently in, you can plan your finances and create a financial plan for your family. You won’t just be providing for them, you’ll be setting a great example to your children, potentially giving them the best possible start in life.
1. List Your Income & Expenditure
The only way to take control of your finances and create a plan that will work for you is to know how much money your household brings in, and how much you spend.
Start by going through your bank statements to list all the regular payments that leave your account. That’s things like the mortgage, insurance, etc. Then, list all the additional expenditures, including shopping, entertaining, and takeaways.
You’ll then know what the difference is. If you’re spending more than you’re earning you’re going to need to earn more or reduce your spending. It’s easier than you think to reduce spending when you can see where your money is going. Some of the figures will surprise you.
2. Consider Your Goals
The next step is to consider your goals. In the short term, you need to clear debts and build a reserve. In the long term, you’re going to want a retirement pot. Alongside this, you’ll have an array of other things that you personally want to achieve.
Decide what you would like to achieve in the next year, two years, five, years, and long term.
Again, this will help you to establish what funds you need, ensuring you reduce expenditure and increase your earnings.
3. Speak To A Professional
With a clear goal in mind and knowledge of your income and expenditure, you’re ready to get professional financial planning assistance.
This will help you to identify areas where you can save extra funds and, more importantly, the best way of making your money work for you.
Although this may not seem much use in the beginning as you have limited spare funds, it’s worth speaking to a professional. Their advice will be more and more useful as your finances improve.
4. Create A Reserve
No matter how well you plan there will be things that go wrong or sudden costs that need to be covered. Building a reserve over your first year of financial planning will help you to cover these issues without affecting your longer-term plans.
It’s best to aim for enough money to pay for all living costs for 3-6 months.
5. Assess regularly
Finally, potentially the most important step in financial planning is to assess what you’re doing on a regular basis. Your financial position changes, as does your dreams. At least once a year take stock of where you are and where you’re going. It will help to ensure you stay on track.
