Three-Step Financial Plan
Many adults have completed a rigorous schedule in college, devised a career path and systematically attend to the needs of their family. They meticulously plan out weddings, vacations and social events. What most people have neglected is to create a financial plan. And, finances are definitely one of the most important things to plan for. Your entire future depends on it and it may take decades to execute.
Financial Planning is Easy
The great news is that it’s very easy to create a financial plan. Don’t be intimidated or confused, because it’s lot easier than most of the things you are already doing in your busy life. Reasons people avoid financial planning is because they either don’t know where to start or they feel helpless to change their current financial situation. Take control of your finances and I guarantee you will feel a lot better.
The most important thing is to get started Right Now. Don’t wait until market conditions are perfect or you are making more money. Time really is money and waiting is always a mistake. The sooner you start, the more your money will grow and the more experience you will have.
Three-Step Plan
1. Goals – Make a short list of goals you are planning to achieve. For me, my original goals were to buy a house, accumulate wealth and prepare for retirement. Later, as I became a family man, I started college funds for my kids. Start with your goals in mind and the direction becomes obvious.
2. Commitment – Goals and plans are worthless without action. Step two is to make a commitment to your financial plan. You need to decide how much you will invest and how much you will spend for debt reduction. My recommendations are to save 10% and pay 20% toward debt. But, everyone’s budget is different. Start with whatever amounts you are comfortable with and increase them as your finances allow.
3. Investment – Picking investments is easy once you have goals and an investment amount. My recommendation for new investors is a no-load mutual fund. Pick a fund with low expenses and a good long-term track record. If you have trouble choosing, pick an index fund. The reason I like mutual funds is because they are convenient for making automatic monthly investments. You can also use a brokerage account or sharebuilder, if you would prefer to invest directly in stocks. I don’t recommend savings accounts, savings bonds or CDs for long-term investors, because they barely keep pace with inflation.
The Bottom Line
The bottom line is that it’s easy to create a financial plan and to put it into action. Having no financial plan is no way to get on track. And, taking no action is no way to get ahead. So, get started today and your finances will definitely thank you tomorrow. Nothing feels better than confidence. But, having money put away is a close second.
3 thoughts on “Three-Step Financial Plan”