King~s Guide To Financial Freedom

You wouldn’t take a trip without knowing where you’re going, so why spend money without a plan? A financial plan outlines your financial goals and provides you with the roadmap to achieve those goals. Without planning, you might not have enough cash in reserve to meet unexpected expenses as the result of job loss or death. You might not be able to pay for your child’s college education, put a down payment on a house or save enough money for retirement. No matter what point you are at in your life, it is never too late to create a financial plan. There are several steps to creating a financial plan:

Assess your financial situation. You need to know where you stand. Taking a hard look at your current finances might give you the incentive you need to actually follow through with creating and maintaining your financial plan. Write down and total your yearly household income, assets (including bank accounts, stocks, bonds, retirement plan, property, cars, etc.) and debts (credit cards, mortgage, loans, etc.). Then, subtract your income and assets from your debts. Are you better or worse-off than you thought you were?

Define your financial goals. Create goals for the short-term (one to three years), mid-term (three to ten years) and long-term (10-plus years). Be specific. Write down goals like, “I want to remodel my kitchen in two years,” “I want to buy a vacation home,” or “I want to retire to Paris.” Then, you’ll need to determine how much money you can set aside to meet those goals within those timeframes. How do you do this?

Create a budget. A budget helps you stay on track with your financial goals. Before you create a budget, however, you’ll need to chart your daily spending or your expenses. You need to record every single expense from an ATM withdrawal to the quarter for the paper. This is the only way you’ll get a clear picture of how you spend your money and what you can do to reduce spending so that you can reach your financial goals. After at least a month of charting your spending habits, determine which expenses are wants and which ones are needs. For example, is that three dollar cup of coffee every morning a want or a need? Once you determine your necessary monthly expenses subtract that amount from your monthly income. Any leftover money can be allocated towards reaching your financial goals. If you have no money leftover each month or you’re in the negative, you’ll need to create a plan to reduce your debts so that you can start saving for the future.

Allocate your assets. Financial planning almost always involves making investments. You need to make your money grow and the best way to do this is to invest. You can invest in stocks, mutual funds or bonds. If you’re not comfortable allocating your assets yourself, you can hire a professional who can work with you to create an investment strategy that fits your needs and comfort level.