Writing a Financial Plan on Your Own

Like anything in life, you need a plan to succeed. That applies to your personal finance too. No one is completely secure financially unless you have accumulated millions of dollars and decide to live off the nest egg for the rest of your life.

Unfortunately, for most people, they are unprepared for retirement. Financial planning is crucial in reaching your goals of retiring comfortably. But having say that, how does one go about writing a financial plan without any formal education?

Below is a quick step-by-step guide to writing your own financial plan. Of course, a professional financial planner may be able to give you a more comprehensive financial plan but this will be a good step forward in understanding your needs and clearing some stumbling blocks.

1. What Are Your Objectives?

Don’t be afraid to dream – you only live once. Think about the size of the home, the education, your family, etc. Just pen these thoughts down of how you want the future to look like. Once you list down your ideals, remember to factor in mundane issues like kids education, insurance, etc.

Your goals should include:

* Education. Regardless of your age, extra education and training are needed either for a career switch or self-improvement. A lot of people are taking college courses (even with teenagers) or upgrading to an MBA to climb the corporate ladder. Even if college education is out for you, you still have to plan for your children’s college degree, unless you intend to leave them to their own devices.

* Career. What field do you desire to work in? Is it a creative job or a typical 9-5? Or do you want to be your own boss? Do you want to create multiple source of passive income?

* Lifestyle. Is work or family more important? Are you contended with “simpler living?” Do you desire a Porsche or BMW? Do you want to live in a mansion, a seafront house, etc? Do you have expensive hobbies life golf? These all cost money so tabulating the expenses and matching it to your income is necessary to achieve your lifestyle goals.

* Retirement. Don’t forget about retirement. It is a moment when you lose your income. So how do you want to live while retired? Will you downgrade your house, live with your children, or move to a retirement community?

* Insurance. Nothing is certain in life. You need to be insured for worst case scenarios. Every financial plan must have provisions for insurance.

These objectives may seem daunting but they need not be wishful thinking. The actual money set aside could be much less than you think, if effective financial planning is involved.

2. Plan Your Income

Of course, your financial plan isn’t just about your dreams. How are you going to pay for it? I assume you don’t have a sugar daddy, so you should be following a life of employment. Most people have their career path charted in this format – go to college, get a job, work hard up the ladder and retire.

There is nothing wrong race except there is high uncertainty in today’s globalized environment. People change jobs all the time due to layoffs or to seek fresh challenges.

Instead of a day job, you can consider starting a businesses or becoming a freelancer to sell your skills. Business isn’t just for those with money, MBAs or connections. You can start a home business to mange lawn care, making money online with a website or a vending machine business.

Besides becoming your own boss, you can find other income through network marketing or investing.

Investing is efficient in building side income as it is simply growing the money you already have. You can buy gold, stocks, bonds, real estate, etc.

Regardless if you are a business owner or an employee, you should not let your money sit idly under your mattress. Even putting your money into an online savings account is more profitable.

3. Writing Your Financial Plan

At its core, a financial plan is a lifelong budget. You’ll be budgeting not just your next paycheck, but for your entire life. Planning involves knowing how you’ll get there and when you’ll get there. There are no hard and fast rules.

You have to be rational enough to assess your current situation, creative enough to see what is possible, and have the integrity to follow through with the plan. Remember, just because it’s on paper doesn’t mean it will happen – you have to decide to follow through and live up to your goals.

Get started by doing the following:

* Timeline. Establish where you want to be in five years? Ten? Thirty? Fifty?

* Research necessary costs. Your current “bills” plus 5% inflation per year. Don’t forget to factor in life insurance, health insurance, car insurance, etc.

* Research luxury costs. What you “want” to do. Cruises, nice cars, nice house, etc.

* Plan income strategy. For most people, they start with salaries. But don’t forget that your job isn’t your only means of income. Starting a side business, a money making hobby, or even making money online are viable options for extra income.

* Plan Investments. Investing is simply a must to counteract against inflation. You can invest in anything. Just make sure you know what you’re doing, and don’t put all of your eggs in one basket. As you age, financial security should become more and more important.

Try to factor in every cost and possible incomes. Whenever you aren’t sure about the numbers, be conservative. Also, bear in mind that a financial plan is ALWAYS about your goals. It’s not just about the money – it’s about getting what you want out of life. Money is just the tool.



Source by Barry Ritz

The Smart Woman’s Guide to Planning for Retirement by Mary Hunt – Personal Finance Book Review

Money maven, Mary Hunt, returns with a new book, “The Smart Woman’s Guide to Planning for Retirement,” to help women prosper financially in the New Year and beyond. While geared toward females, men can also benefit from Hunt’s money knowledge, honed after she amassed over $100,000 in debt earlier in life; and took 13 years to erase.

“Have you had a retirement wake-up call?” Hunt asks early in the book. “I can promise you they intensify with age.”

Hunt sites a 2012 survey that found that 92 percent of women of all ages do not feel educated enough to reach their retirement savings goals.

Saving for retirement requires determination and hard work; and Hunt believes women can succeed. “If we lack confidence, it’s because we lack knowledge and desire, certainly not because we lack intelligence and ability,” Hunt says.

Time trumps all factors when saving for retirement. The sooner you start, the better. But, Hunt emphasizes, regardless of what stage you are in life, you must begin now. “It’s only too late if you don’t start now. No matter where you are or how little you think you have, start now. Today. Start. Saving.” Take baby steps to produce long-term results.

Hunt’s teachings feature:

Retirement Savings Plan. Hunt promotes a six-step Retirement Savings Plan, which includes:

Build an emergency fund. Also known as a Contingency Fund. Save money for life’s unexpected expenses (car repairs, home repairs, etc.) This money needs to be liquid (easily accessible within two or three days), safe from erosion (build in a risk-free savings account) and able to fund at least six months of living expenses should a job loss or other compromised income event occur.

Get out of debt. Eliminate all unsecured debt (credit card debt, student loans, personal loans). Hunt says they’re like cancer stealing your future. Incorporate Hunt’s Rapid Debt-Repayment Plan (RDRP) to abolish the debt.

Own your home outright. Buy half as much house as your mortgage approval. Make monthly mortgage payments equal to the full approval amount to own your residence in half the time. Fiercely protect your home equity (the difference between your home’s market value and mortgage balance). Avoid taking a home equity loan or line of credit, which resets the clock on a thirty-year mortgage.

Consider hiring a financial planner once debt is eradicated or managed, a respectable amount in savings is amassed, retirement funds are growing, or an IRA inheritance or other cash windfall appears.

Hunt describes three types of financial planners:

  1. Commission-based. This planner doesn’t charge based on time, but by selling investment products. He or she earns commissions on those sales.
  2. Fee-based. This planner works on a fixed fee or charges by the hour. Fees are stated up front and the planner is a registered investment advisor (RIA). They’re required by law to meet fiduciary standards, making them responsible for putting the best interests of their clients first.
  3. Combo. This planner is a combination of the first two. Clients pay a fee, fixed or hourly and the planner earns commissions when the client buys financial products based on their recommendations.

Choose a financial planner with at least five years experience Hunt suggests. Ensure they act in your best interests, and can explain financial concepts on your level. Be wary of any planner who claims to be able to beat the market. Ultimately, collaborate with a planner; yet make your own investment decisions. Hunt underscores that, “An advisor’s or planner’s primary loyalty will be to the hand that feeds her. That is simply human nature.”

Hunt educates in a conversational tone, avoiding jargon, charts and mind-numbing data, which makes for an engaging read. A Christian, she teaches faith-based money management. Hunt believes that God is the source of all life’s blessings, including money. An employer, spouse, investments, trust account, parents or any other entity are the channels through which money flows, but not the ultimate source. She’s making reasonable preparations for retirement without obsession; and trusting God for the outcome.

While having a retirement nest egg is important, Hunt reminds readers there is more to life than money. Health, spirituality, nurturing relationships, staying active, continual learning and volunteering are some attributes of a well-balanced existence.

Decade-by-decade financial planning, the five necessary tools for a money management system, investment basics (automate all payments to avoid not making monthly contributions (out-of-sight, out-of-mind), reverse mortgages, and parents paying for their children’s college education (not required), are other money-saving/building topics addressed in the book.

Anyone committed to improving their financial fitness in 2014, will reap life treasures, beyond the bounds of cash, by inheriting Mary Hunt’s money practices.

To establish your baseline financial status, and/or monitor your progress, order your free credit reports from the three big credit companies: Equifax, Experian, TransUnion, visit: Annual Credit Report.



Source by Timothy Zaun