Thinking about your financial security? You might want to initiate that thought with a financial plan. As you know, to be financially secure, there are specific changes that you must make to your finances. One of those changes is having a financial plan. A financial plan will help you make good choices, avoid debts, and to value saving. Sounds like something you need? In this article, we share tips on creating a financial plan that will secure your future.
Have a budget
Imagine stressing out because you suddenly have to adjust to a lack of funds or having to borrow money to meet your basic needs? Financial success begins with discipline, and one way to practice it is by having a budget. Most times, we find ourselves in overwhelming debts because we fail to account for our expenses. Having a budget helps eliminate unnecessary expenses and helps you stay organized with your money. Since it looks at your income sources, expenditures, bills, and debts, you can balance your expenses with your income. The good part is that you can save extra money, which is a great step towards financial security.
Eliminate your debts
Another great tool in financial planning for a secure future is debt elimination. According to experts, debts that consume 20-30% of your income are a threat to your financial health. Debts can be avoided by sticking to a budget and not borrowing money to spend it on things you do not need. However, if you have huge debts, all is not lost. You can still plan your finances with debt management or a repayment plan. A repayment plan will allow you to pay off your debts based on how much you can afford. For instance, if you are stuck with credit debts, you might need to hire a debt consultant who will assess your debt and negotiate ways to pay off your debts. With the help of a debt consultant, you can still enjoy financial freedom.
Save! Save! Save!
When we talk about a secure future, we are talking about financial freedom, being able to pay for emergencies, having no debts, paying for a vacation, and the list goes on. Well, all these are possible if you learn to save. The good thing about saving is that anyone can do it. You just need to have a budget and figure out a percentage to set aside for your savings account. Common saving methods include; setting aside a certain percentage of your income, avoiding impulse buying and starting an emergency fund, etc.
Pay off your taxes and credit charges
Heard of bankruptcy? The sound of it seems scary. When a person accrues so many debts from unpaid taxes and credit charges, they become unbearable and unmanageable. Sadly, most people choose to declare insolvency to avoid jail term at least and harassing calls from creditors and tax bureaus. You must know that coming out of insolvency is not easy. It takes years to resolve such cases. In case your tax problem is complicated, don’t panic. There are settlement plans available to help you clear your debts. You need to find a skilled tax attorney to help with the case. An experienced tax attorney can help in keeping your financial future safe by handling issues you have with the IRS. For example, the attorney can help in IRS appeals, handling tax mistakes on the part of the IRS, demonstrating that you can’t pay off debts, preventing the sale of your property, etc.
Have an emergency fund
When planning your finances, it is good to have a fund that will cover all your emergencies. Having this fund will help preserve your long term savings. Again, you can choose to allocate a small percentage of 2%- 3% of your income for this fund. Emergency funds cover costs such as uninsured medical emergencies, loss of a job, unexpected home repairs, fires, etc. Remember, when you do not have to go to your pockets or savings in such a crisis, you are on the right path towards financial freedom.
Diversify your investments
Do not put all your eggs in one basket. Sounds like a cliché, right? Before you underestimate it, think of a situation where you have invested all your savings or money in a project only for it to go down the drain. Since we cannot predict future eventualities, it is essential to plan your finances by diversifying the risks.
Additionally, when you invest in different assets, you minimize losses given the returns of the different assets vary. For example, a good combo can be diversifying your investment in real estate and stock exchange. In case of a downturn in stock returns, you can keep enjoying the income from your real estate venture. It is always advisable to consult with a professional before investing.
Financial planning is not easy, but it’s doable. It takes serious work and maintaining discipline on the steps that you come up with. While there is no guarantee of specific outcomes when planning, at least you get a picture of your goals and avoid the financial distress that comes from lack of planning.
Author Bio: Deborah Anderson works with a leading finance magazine and also has been helping small and thriving businesses with their financial ventures. She loves spending most of her time with her family, when she’s not working.