The Elements of a Sound Financial Plan
Anne | 2/4/2009, 10:34 p.m.
There is an old proverb that says €If you don€t know where you are going, any road will get you there.€ In order to attain and reach your desired long-term financial goals, you have to plan. You have to have a vision, a goal, and a dream of where you want to be financially in the future. You must follow a road map to get there. Financial planning is simply putting a plan into action to get you to your desired future financial goals and sticking to the plan, your road map.
You should plan to cover anything that can happen in life; to become debt free; to enjoy retirement to the fullest; to protect your assets; to protect your and your family€s financial security; and to achieve your desired goals. Maybe you want to build a college fund for your kids. Maybe you want to purchase a new home. Maybe you want to start a new business. Maybe you just simply do not want to have to worry about money ever again. If we do not properly plan, your financial goals will not be attained.
There are five important factors to exam when setting up a solid financial plan. First, you have to learn how your money works and where it goes. Day in and day out we go to work, earn a paycheck, pay the bills, and buy items we €think€ we need. Before we know it, the money is gone and we are waiting on the next paycheck, ready to repeat this cycle all over again. You have to stop doing that. You really need to sit down and examine where your money is going each and every month, down to the penny.
Second, once you€ve learned where your money is going each and every month, you will be able to see where you can cut out frivolous spending. Instead of eating lunch out every day, take your lunch. If you buy coffee every morning, brew your own at home and take it with you. Now ladies, I know how we are about our hair and nails but let€s be honest, is it really necessary to go every week? When you go grocery shopping, take the time to clip those coupons. You will be amazed at how much you can actually save on your grocery bill. After you see where you can cut expenses, sit down and devise a budget. A budget is not meant to restrict you or confine you but, to help keep you in control of your money, where you spend it, and how you spend it. Stick to your budget!
Third, with the extra money that you have uncovered by eliminating wasteful spending, €pay off your debt!€ This is very important. Your debt to income ratio determines what rates you get on credit cards and loans and, also affects your credit score. If you need to make payment arrangements with your creditors, do so. They would rather hear from you than not. With the state of the economy right now, they are more than willing to work with you.
Fourth, you want to make sure that you save some money as you eliminate your debt. You need to have an emergency fund set up because things will happen when we least expect them to. You do not want to use your credit cards while paying down debt unless it is absolutely, positively necessary. The car will break down; the house will need a repairing; an appliance will need to be replaced; and the list goes on. You need to have a little money set aside to cover an emergency.
Finally, you want to make sure that all of your assets are protected and that you are building for your retirement. You need to be properly insured. We insure our cars, our homes, and if we are fortunate enough, have health insurance, But, many are still not insuring their most valuable asset, their ability to earn an income.
What if you become sick or disabled and can€t work? Did you know that there is a life insurance plan available that can help you save for retirement, gives you protection and income in the event you become sick or disabled and accumulates cash value that you can access at any time for anything? The proper insurance policy is your umbrella of protection in your financial plan.
Next month, we will cover in more detail how money works and how to get out of debt.
For questions or comments about this article contact Jennell Burke at 301-324-1346, send an e-mail to BurkeFinancial@gmail.com, or visit the Web site at www.Burke1Enterprises.com.