Financial security and independence is one of the most common dreams yet only a very few achieve it. For some reason, everybody wants to be financially free but most people are not willing to pay the price and sacrifice for it. In most cases however, some people simply doesn’t know how to do it.
Financial security doesn’t happen by fate or by luck. It entails a step by step consistent process in order to achieve it. Financially independent people took years to build their financial foundation through a sound and well executed financial plan.
Financial planning is essential to become financially secure. It is just like architects and engineers working together to build an infrastructure. Without proper planning, such establishment will topple down in no time. The same is through with financial planning. If finances aren’t well planned, it will take a life of it’s own and go messy. Have you ever noticed people who are earning well yet fail to save and build a good financial nest after years? A good income flow would mean nothing if not planned properly.
Planning your finances isn’t difficult if you know what you’re doing thus knowledge is the key. Here are 10 tips about financial planning.
1.) Find a number of financial mentors. There is no better way to seek advice on the subject than from a person who is an expert in such field. There are several professionals in financial planning and they could help you with your goals. The reason why I said a number of financial mentors is the fact that the financial industry covers a very wide scope and there are different experts in different fields. Other than that, you can also get different opinions from different experts which will help you draw a better conclusion.
2.) Learn. Ideally, the best mentor that you can have is yourself thus invest and exert some effort to learn on how the money market works. Unknowingly, learning the money market is one of the most important keys in making a financial plan because it is through the market that we either make or break our financial goals. Insurance, investments, savings, and basically every financial goal that we set are under the money market.
3.) Health care. Having a health care is the first thing that you should do. Health care will cover the expenses in case you get sick. Getting sick is one of the biggest reasons why people go down the financial drain. Many people pull their savings and investments out once they or somebody on their family gets sick. Having a health care plan will protect your savings and investments. Another good thing about health care plans is that since getting sick is costly, the company itself will avoid spending much by giving you free consultations. It’s a win-win situation for both the company and the policy holder.
4.) Insurance. Life is unpredictable, we simply don’t know what will happen to us in the future. Insurance will protect your loved ones once your income generating capacity is lost either through an accident which results to permanent disability or death. Though insurance could never replace the emotional loss, at least it is more than enough to help your loved ones financially.
5.) Eliminate debt. Ideally debt should be avoided yet in some cases, having debt is sometimes unavoidable. If you have an existing debt, strive hard to settle it. Debt creates a life of its own and once it goes unnoticed, it gets out of hand. Loan interest rates are very high that they can compound into a really significant amount in no time. Avoid it by paying it off quickly and if possible, avoid the interests.
6.) Increase cash flow. Increasing cash flow is the key in accumulating wealth. If you have a job, find something else where you could earn more. Put up a business or find a second job. The more cash coming in, the bigger the savings becomes.
7.) Set up an emergency fund. Emergency fund, as the name suggests, is for emergencies. The reason of setting up an emergency fund is for you to have something to provide you when the need arises. This is one of the most overlooked aspects in financial planning. People invest directly without putting up an emergency fund which makes them resort to their investments once the need arises or are saving but doesn’t really know where to put it to resulting to unnecessary expenses.
8.) Invest. Investments are important especially for long term. It will not only make us financially secured but also the succeeding generations as well. Since investments are for long term, they should not be touched in case the need arises so as not to jeopardize its growth. Investments include paper assets such as stocks, bonds, mutual funds, and other equities or tangibles such as real estate and businesses.
9.) Protect your estate. Investments doesn’t grow by default and often they fail hence it is very important to protect your investments. Natural calamities and crimes (petty usually) are normally the risks in investments. Because investments are long term, they become so vulnerable to such risks thus the need of protecting them through their corresponding insurances are highly advised.
10.) Stick to your plan. Whatever your plan is, stick to it. One of the reasons why so many people fail in establishing their financial nest despite having a good financial plan is the fact that they don’t stick to their plan and keep their eyes of the goal. All financial tools are very lucrative and tempting but they all work in time, without time, they won’t yield good results. Very successful people financially have plans and they stick to it no matter what. You can never have all tools so pick the ones that matter the most and stick to it.
Being financially secured isn’t easy but it is all worth it. It entails patience, discipline, guts, and a lot of learning. It is much better to sacrifice right now and knowing that you will be well off in the future rather than enjoying everything right now by not paying the price in advance and suffer in the future. So learn, draw out a plan that will work for you, stick to it, and work it out. Robert Kiyosaki said that in order to become rich you need three things:  Education,  Experience,  Excessive Cash. You’ve got the first already, it’s time to focus on the second.