Finance 101: Create A Financial Plan

Financial planningThe key to anything, including building wealth, is having a plan then working the plan. Creating wealth for you and your family is worth the time to make a plan. Think about your short and long term goals, how much debt you currently have, your assets and what investments you would like to make. The best way to build wealth is to invest. It doesn’t matter the vehicle (real estate, stock, businesses, etc.), only that you research it well and get help from the professionals in those fields. The secret to wealth is multiplication. 3+3=6 but 3×3=9. You want whatever makes your 3 a 9!

First step of the plan is to dispel money myths  AND be intentional about your goals. If you make minimum wage you can’t create wealth. This is not true. It takes much more work than someone who makes $50,000 or $100,000, but it is possible. The Universe\God, or however you call your higher power, mandates that you have an abundance. So the write down “I AM WEALTHY” at the tippy top of your paper. Did I mention take out a piece of paper? Remember there is a difference between money and wealth. Money is a tool to create wealth. Don’t just focus on making more money.

Second step, write down your goals. Your goals must be measurable with a time frame for completion. For example, pay down credit card debt by April 2015; buy a home by December 2014; have stock portfolio worth $50,000 by January 2015, etc. You get the picture. WRITE YOUR GOALS down. You have to be able to see them. If you’re using a certified financial planner (CFP) he or she will probably have a worksheet for you to use. Using CFPs doesn’t have to be expensive. There are professionals in EVERY price range. It just takes some research. Don’t forget your retirement goals, e.g. $1,000,000 by age 65.

Third step, write down your monthly in and out, then make cuts. How much income do you make versus your expenses (bills, movies, clothing, child care, child support, etc.). Also, get all of your financial documents in order – bank statements, bills, etc. Use a financial management software tool. I use Quicken. Look at where you can make cuts. For example, can you cut down the cable bill; can you get on a better cell phone plan; if you have a cell phone do you need a home phone; are there alternatives to the local telephone company (Vonage) if you need a home phone. How much are you spending at Starbucks? Is your car insurance premium too high. I go through my in/out analysis about three times a year. I’m also considering getting rid of cable given all of the alternatives out there.

Fourth step, what’s your budget and your, what I like to call, money map. It’s easy enough to make a budget. Simply write down your bills and how much you will contribute to each. Your money map is where your income is going as soon as it’s paid. For example, direct deposit your check to your main checking account and your savings account. If your budget says you will save $100 from each check, don’t tempt yourself by having it go into your checking account first. Most employers will allow you to direct deposit into 3-6 different accounts. Brokerage accounts can also accept direct deposits – put in $50 a month if you can. As this account builds you can buy more and more stock. Be sure to budget a treat for yourself every now and again, this will make it easier to stick with the habit. Also, match your budget to your goals. Calculate how much you want to pay toward each credit card, the one with the highest interest should be paid off first, pay the minimum on the other cards.

What options are you not taking advantage of? Does your employer offer a retirement savings plan and you don’t participate or could you up your contribution. Are you eligible for benefits through the local, state and federal government that could provide a boost.

Fifth step, put your plan in action and adjust as needed. If you find that you can’t swing $100 per month into your savings account, try $80. Maybe you can’t contribute 4% into your employer 401(k) so try 2%; or perhaps you only do 2% and you could 6%. Recheck your plan, does it have a wealth-building component? If not, go back to step two. Remember you want to multiply your money. If you get $50 you want to turn that into a $1000.

If some of my example numbers seem out of reach to you go back to the first step. The Universe mandates you have more than you know what to do with. But it requires that you get uncomfortable and shed some of your beliefs about money and wealth. YOU CAN HAVE ALL OF THIS AND MORE BUT IT TAKES WORK!

I’m just keeping it new.

2 Thoughts to “Finance 101: Create A Financial Plan”

  1. […] you read the Finance 101: Create A Financial Plan you know that the first step is to your mind of your money habits and beliefs. This is a great book […]

  2. […] out how much you can afford. Don’t have a budget you can refer to, learn how to create an overall financial plan. Protecting your health is protecting your […]

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