What should your personal financial plan include?
A personal financial plan can help you stay out of debt, pay your expenses, and save for the future. But what should a personal financial plan include? Consider the options as you determine how to create your plan to fit your current needs and anticipate your needs for the future. Here are just a few things your personal financial plan needs to include.
Assess Current Finances
To make a plan, you need to know your starting point. It’s easy to bury your head in the sand when you’re afraid of what it means to really evaluate where you are with financial matters. Even if it means taking a long hard look at debt, start by assessing your current money situation.
Review your debt and see how much you owe. Compare this with your income and subtract your general living expenses, including entertainment. That will give you an idea of where to begin. It’s okay to be a little scared once you see the total amounts, but not acknowledging them will never give you an option to improve.
Determine Your Goal
Once you know your financial situation, what’s your goal? Do you want to pay down debt? Do you want to save for a specific goal or for retirement? Whatever the case, put it writing and make a plan.
With your goal in mind, you can create a financial plan that will work for you and for the money you have coming in. For example, if paying off debt is the biggest priority, consider your income and expenses and give yourself a goal of paying a certain number toward your debt per month.
Pay Yourself First
Some financial experts suggest that you always pay yourself first. That is to say that you determine your income and expenses and be sure to put a certain amount away for the future. One way to make fast cash when you need it is to get a title loan to help you reach your financial goals quicker, for example paying off your credit card.
It doesn’t mean that you keep money for fun spending just because you want to treat yourself to something you can’t otherwise afford. The temptation may be strong to allow yourself financial cheat days, but avoiding this is more important to your long-term financial health.
Give Every Dollar a Job
Another popular personal finance plan is the envelope system. This doesn’t have to mean literal envelopes, just a way to categorize your money to ensure that every dollar you bring home has a job to do.
For example, look at your monthly income. How much of that needs to go to your expenses such as rent, utility bills or groceries? Create an organization system with each of these headings and put the dollar amount under each category. Do the same for debt, savings, and entertainment. Your income each month should be down to zero with each dollar you earn assigned to a category.
By creating a personal financial plan, you can create a healthier relationship to money that can help you advance your own personal goals and pay off any outstanding debt that is a weight on your shoulders. It will also give you a basis to begin saving for the future.