Now that you have mastered the importance of knowing your financial position, as it will assist you in tackling the financial problems that have been bogging your life, it is time to come up with a financial plan that will ensure that you enjoy the fruits of financial freedom. A financial plan is basically the steps that you will need to take to achieve your financial goals and dreams. This will involve coming up with a list of all your incomes and expenses. Many people consider this to be very tedious exercise, and quite frankly it is, but how will you know where you are going, if you do not know where you are coming from or where you are. I guess you just have to bear with some of the costs of financial freedom. The following article by Simon Barnett, explains the basic approach to financial planning.
The task of financial planning can sometimes leave you feeling like you have a mountain to climb. You probably know that, in theory, it’s a good eye to keep a close eye on your finances. But there may be a big difference between theory and reality.
The reality may be that you find the thought of personal finances rather boring. Don’t worry – you’re not alone in holding this view. There are many, many people who would look at the financial world in the same way. Unfortunately, the failure to keep an eye on your finances could have some pretty horrible consequences.
This means that it’s fine to dislike this subject, but that the reality is that you can’t allow yourself to ignore it. Inertia is likely to lead to an increase in your spending, and further problems before long.
So the key is to keep financial planning as simple as possible. It needs to be comprehensive, but there are strategies that will allow you to make things quite easy. The most important first step is to remember that good planning is going to be about having a good level of record-keeping. So that means that you’ll need to file documents away in a safe place. What do we mean by documents? Well, that pretty much covers anything, from pay slips to dry cleaning bills. You want to keep hold of everything that records money that you earn, or money that you spend. Keeping all of those pieces of paper will make things much easier for you.
The reason that it will make things easier is because it will allow you to quickly enter all of that information into a simple spreadsheet. You can then establish the true state of your finances. Don’t be fooled into thinking that you need to use a complex piece of financial software. Microsoft Excel will do just fine. Having recorded all of your income and spending over a period of time (ideally one month), you’ll be in position to take a look at how you’re doing. Are you spending too much money? If so, now’s the time to draw up some strategies moving forward. Maybe you could spend a little less on some of life’s luxuries?
As you can see, financial planning needn’t be difficult. Keep it simple, and you’ll soon find it a lot less of a strain.