Financial planning is a task everyone needs to tackle at one point or another.
The earlier the better. Without a clear financial plan, you can be facing a lot of stress and financial chaos.
A good plan includes budgeting, debt management, as well as retirement planning. Here are four simple tips to help you get started with the basics of financial planning.
1. Set up a budget - how much money do you have coming in? How much money do you have going out? What is the difference between the two? Preferably, you need to have a positive cash flow. If you find that you are spending more than you make, then you need to make efforts to decrease your expenses and/or increase your income.
2. Become free from debt. Once you have created a budget and determined what your cash flow situation is, if you find you are in debt, you need to make a plan to get out of it as quickly as possbile. Having too much of a debt load is a financial burden, and can cause you trouble if something happens that is unexpected, such as health issues, unexpected repair bills, or divorce.
3. Set up a retirement plan for yourself. Fewer and fewer companies are offering pension plans, and Social Security is no longer a guaranteed option. It may seem a long way away, but you need to be saving for your retirement and planning for the future as early in your earning career as you are able. People are living longer these days and so your money is going to have to last you longer. Set up a plan and stick to it.
4. Consider your insurance coverage. Once you have created a budget, cut down on your debt, and started planning for retirement, then you will need to make sure that you have enough insurance. Not having insurance can destroy all the hard work that you've done in trying to get your financial affairs in order.
You need to take into consideration what your needs are as far as health insurance, life insurance, home owners insurance, etc. Don't be tempted to cut back on your insurance coverage simply to save a few dollars. One disaster is all it takes in order to regret that decision.
Follow these four simple steps and you will be well on your way to implementing a solid financial plan.