There are times in life when ‘winging it’, or ‘flying by the seat of your pants’ is a good idea. After all, facing new challenges head-on gives life extra meaning and can be a lot of fun.
But, when it comes to finances, you need to adopt a strategy that will allow you to build your reserves for the future. This is the best way of ensuring you have the funds you need for emergencies and in retirement.
There are 5 simple steps to help you achieve financial planning success.
1. Define Your Goals
You can’t plan for anything unless you know what your goal is. Are you saving for a house deposit? Perhaps you’re interested in having early retirement, or in taking a year out to travel the world.
Knowing your goal is essential, it allows you to calculate the sum of money you’ll need and then work backward. For example, if you want to take a year out you need to know how much spending money you’ll want for the year plus the bills you’ll have to pay while you’re away.
This gives you the goal amount, allowing you to move to step 2 and create the timescale.
Knowing what you want, and having worked backward, you’ll be able to calculate how much you need to save on a monthly basis.
You’ll now need to create your budget. This means listing all your current expenditures and your income. When you’re doing this you’ll be able to see the areas where you’re spending more than you need to. You can eliminate these to help free up money for your goals.
If your budget doesn’t allow you to save as much as your goals demand, you’ll need to extend the time until you achieve your goals, or look at ways of increasing your income.
Either way, setting a budget is essential to give you guidance on your financial journey.
3. Talk To A Specialist
This is a good time to talk to a reputable specialist in financial planning. They can help locate investment vehicles to help you achieve your goals. They will also be able to assist you in creating the budget and finding the money you need to reach your targets.
4. Review & Revise
It’s essential that you review your budget and your goals regularly. You may have the opportunity to increase your investments or adjust your goals. It’s impossible to say what curve ball life will throw your way. But, by regularly reviewing and revising your budget and goals, you’ll make sure you stay on track.
5. Keep A Reserve
Finally, as part of your financial planning, it’s essential to build up a reserve fund. This should be enough money to live for 3-6 months. Your emergency reserve is only for emergencies but, if something does happen, you’ll be glad you have the funds available and you won’t need to adjust your longer-term goals. It will still be possible to achieve them!