Do you know anyone in your circle who makes a financial plan? Probably not. Studies show that an average household spends more than it earns. This is basically the reason why debts are becoming “a way of life”.
A financial plan is important because it lets you focus on your financial goals so that when you do decide to retire from your current job, you will still have money left in your bank account. This is something neglected by a lot of people and I can say I am guilty of this too.
Now that I am doing freelance work, managing my finances is really important since my income is not as regular as those who work in an office. If I do not create a financial plan, I could end up without money to spend for a few months.
When you make a financial plan, there are several questions you will need to answer before you start with the planning phase: Where do you want to be financially when you retire? Do you know how you can get there? How do ensure that your kids will have enough funds for their college education? The next paragraphs will outline how you can effectively out your plan into good use.
Strategy 1: Long-term investing
Reaching your financial goals is going to be really difficult if you plan to do it alone. Through investing, you can watch your money multiply with stocks, bonds, and mutual funds. You will, of course need to know the difference between these three, and these will be discussed in the next posts.
Strategy 2: Asset Allocation
Investment options such as bonds, stocks and mutual bonds have varying times for the return on your investment (ROI). The key to good investing is allocating your resources so you have a good balance for long-term ROI and short-term ROI. There will be times you will need your money for an immediate expense, in this case, it is important that you can readily liquidate some of your investments and you would also want some amount left so that it can still earn some interest.
Financial planning is not as easy as you might think. In the next posts, I will discuss more about these two strategies and you can decide for yourself what you want to employ.
Tags: finance, Financial Planning, investing, investment