Wealth cannot be accumulated overnight. People new to financial planning should try to learn the financial aspects affecting their lives. Financial planning is different for each person because not everyone has the same priorities in life.
Here are some financial planning tips for newbies which will give them a kick start:
1. Organize yourself. Getting organized is the best way to start. Keep all financial statements and documents in one place in an organized manner that is easy to access.
2. Identify your goals. You should set a destination where you want to see yourself later on. What are your plans for the future? Write them down according to your priorities, including what you think it might cost you to achieve that goal.
3. Know where you stand, based on your goals. This will become your starting point for gauging your growth. From this point, you can determine how you budget and control your finances in order to reach your goal.
4. Start the discipline of saving at least 20% of your monthly income. Utilize any savings instrument, but start saving! Keep it in liquid form that you can access in times of emergencies like disability or loss of income.
5. Start investing and buying adequate insurances. Your savings should have adequate insurance coverage. Buy an adequate life insurance that is 20 times your income per year. But don’t buy insurance policies in order to save tax.
6. Control your expenses by tracking whatever you spend, where ever you spend it. Write them all down and keep a record to be able to track your pattern of expenses. After some practice, you will begin to understand the importance of spending wisely.
7. Cut down on expenses and stay out of debt. Start by paying off your smallest debt. Every debt paid is debt paid off. Pay the next smallest debt. Each paid debt is a step towards progress. Keep on paying them until you are completely out of debt. Then stay out of it and keep your expenditures low.
8. Avoid making loans until you are confident in managing your finances. If you are just starting to plan your finances, loans at this stage will hold you to long-term commitments that you are not ready to engage in yet.
9. Set up a will, even if you’re still too young and it’s still “too early.” Having a properly written and finished will is important because it will put your financial affairs in order after you’re gone. You can set it up one way now, and change it later on as your financial situation changes. It will give you peace of mind knowing that you have done your best and everything you left is in order.
Planning your financial future is not a complicated process. The important thing is to concentrate on goals that make you happy, and spend your money around those goals. That’s how you will be able to build happiness and satisfaction in your life.