How to Fulfill Wishes With a Financial Plan

By James On Apr 19, 2023

A high income today does not guarantee the absence of money problems in the future – the usual source of income can dry up. You can protect yourself if you control your expenses, make a financial plan, and become an investor.

Financial Plan and Accounting

A financial plan is made in several stages. The result is an instruction on what to do and how to do it in order to become richer.

Personal Statement of Assets and Liabilities

Calculate the market value of all your assets: bank deposits, real estate, car. If your assets are profitable, for example, if you rent an apartment, put that in a separate column. These are assets.

Count debts for mortgages, credit cards, and student loans. It’s important to include the interest rate and the repayment schedule. These are liabilities.

Income and Expenses

Count your income and expenses for the month and for the year. If the balance is negative, you are living in debt. You will either have to take a part-time job or play for money with promising casino offers and increase your income, or give up some spending: regular visits to cafes, emotional online shopping or generous gifts. If you’re in the black, build up a reserve – a financial safety cushion.

Set Financial Goals

Be clear about your goals. For example, you definitely want to retire at fifty and live off the interest. At first, a big goal can be intimidating, but if you break each goal down into tasks, you’ll find that it’s achievable.

Start with something you can do right now: set aside 10% of your income, cut back on expenses, or eat lunch at home instead of at a coffee shop.

There are different ways to reach your goal. Investing in stocks or bonds, real estate, banking products are ways to make a profit. If it’s hard to figure it all out, a financial advisor can help. He is like a doctor who examines the symptoms and prescribes treatment, tells you what you need to do every day and month with your money, and selects the necessary tools for investment.

Follow the plan. If you don’t take the medicine prescribed by your doctor, you won’t get cured. It’s the same with financial goals – today you plan to buy a summer house, and a month later you buy a new game console on credit. Most likely, you will not reach your goal and will repent of your lack of character. Increasing assets and personal capital requires discipline.

How to Avoid Mistakes

You don’t have to be shy about saving money. Many rich people are quite frugal: they drive an old car, dress simply, and dine in inexpensive establishments. They are ordinary people, but they have specific goals: to give a great education to their children, to change the world through charity, or to launch a spaceship. One thing that distinguishes the rich is that they come to their goals through clear planning.

There is no secret of wealth – any millionaire invests free money. For instance, in the USA, people with $1 mln. in their account invest not less than 20% of their earnings into securities.

Your child or grandchild will become a millionaire, if you take up the matter today. To increase capital, two factors are important: time and start-up capital. If you invest $2,000 at 11% per annum and add $400 every year, in fifty years you will have $1,036,637 in your account. Stock indexes like the S&P 500, which includes stocks of major U.S. companies, grow at an average of 11% per year.

If you save money aimlessly, without a dream, you won’t want to do anything. Another thing is to imagine a result, such as a new car. Find out how much the car costs, request a test drive, and evaluate the car’s capabilities. If the desire to buy isn’t lost, move on to action: make a financial plan and invest your spare money.

Advertising says to “live in the now” – global brands are increasing sales. The question is whether the latest trends and prestige items are more important to you than big financial goals. Compare: a new smartphone today or a new car in five years, another jacket for the winter or a vacation to the Maldives in two years. Without prioritizing your personal finances, you can’t get a handle on them.

Summary

Managing your personal finances is the only way to protect yourself from financial risks:

Making personal financial reports will help you get your spending under control – free money will appear.
Free money is worth investing in a business you trust. Depending on your financial goals, invest in stocks or bonds. To understand on your own how financial markets and stock exchanges work takes time. If you don’t want to take the trouble to learn, contact an investment advisor.
Don’t be afraid to look like a miser. Advertising-imposed principle of “live now” has not made anyone rich. Managing your finances will not only help you find money for big goals but also for enjoyable daily spending.