“If we never save money or invest, we will always be poor,” so the saying goes. That said, it is never too late to start financial planning. So, if your goal is to have a better financial future, follow the steps below to get you started off on the right foot.
Stick to a Monthly Budget
Perhaps the first step in financial planning is to draw up and stick to a monthly budget. To quote Warren Buffet: “Do not save what is left after spending, but spend what is left after saving.”
Keeping a budget is especially useful for highlighting all your unnecessary purchases and expenses. Without a budget, you are more likely to impulse buy without realizing its effect on your income.
Sticking to a monthly budget will keep you in the black and help you invest regularly in longer-term financial goals.
Financial planning will force you into looking at things more long-term. It will stop you from buying things at the last minute when you have inadequate funds and then paying off years of interest.
A good example of this is buying a house. By making prudent investments over, say 20 years, you will probably end up owning a property that is worth more than you the amount you invested. If you start planning (and acting) now, you are more likely to purchase long-term goals at a lower cost than what you will actually pay for them.
Secure Your Future
When deciding on your financial strategy you should also look at insurance. Your income can be interrupted by unseen events like illness and accidents. Insurance will prevent these derailing your long-term financial goals.
The type of investments you plan to make will determine the insurance you need.
Save on Taxes
Uncle Sam offers a range of saving options that are either tax-free or tax-deferred. These include things such as Individual Retirement Accounts (IRAs), 401K plans, savings bonds, and FSAs.
By planning wisely, you can cut the taxes on your investments and increase your capital growth.
Increase Your Net Worth
Prudent financial planning will also improve the management of your cash flow. A sound plan will include regular analysis of your income and should prevent you from going into negative equity or debt.
This will help you build your assets without increasing your liabilities. Result – a rise in your net worth over time.
Raise Your Standard of Living
With a good financial plan in place, you should be able to lead a more comfortable life. Planned saving and investment will enable you to achieve goals such as buying property. Not only will your standard of living rise, but also your assets.
Spend Without Debt
As well as long-term goals, financial management can help with annual vacations or buying a car. A proper saving plan enables you to purchase these without resorting to credit cards or loans.
When it comes to growing money, time and compound interest are your two best allies. So start a financial plan. Now.