Learn about financial planning if you want to financially grow. The truth about this planning is not only about recording your income and expenses but also about achieving your goals. Hiring a professional financial advisor is one of the effective solutions. Yet, you should know first the elements that must be included in your financial plan.
Your Income
Calculate your income per month. It can be from your job as an employee, business owner, affiliate marketer, content creator, and others. Write all the sources as well as the average income you earn from them.
Focus on the money you have earned or the money in your bank account. It will be easier for you to manage the money and make plans.
Your Expenses
The next step in creating a financial plan is calculating your expenses. As you calculate your income, write all your expenses per month. It can be your grocery shopping, debts, entertainment, and other things.
The more detailed you are writing the expenses, the better for you to manage the money. It explains how much money you have after spending it. As a result, you can start to make a realistic plan or goal based on your financial condition.
The Money You Want to Keep
Morgan Housel explains that you must save your money even if you don’t have any goals. Warrant Buffet even says to save your money first then manage the rest. So, the next element that should be in your financial planning sheet is the saving.
Determine how much money you want to save. It doesn’t have to be 50 percent of your income. Be realistic! The most important thing is your consistency in saving money.
Your Emergency Funds
The money you save is different from your emergency funds. That’s why you will have a savings and emergency fund in the financial plan. As its name suggests, you can only take the money in urgent conditions.
Use the money only if you lose your source of income, pay unexpected medical bills, and other unexpected expenses. It will be great if the money can cover for three up to six months.
Your Plans and Goals
Indeed, you need money to achieve your goals. So, create a separate point on your financial plan. Write all your plans and goals, along with the money you need to achieve them.
It is okay if you want to mention the time you achieve it. Say you want to buy a new house, vehicle, or gadget, retire earlier, and many more. Write it in this section.
Effective financial planning takes time. Yet, you will feel the benefits after doing it for a few months. Just call a professional advisor in case you need help to manage your money.
