Financial planning ought to be a comprehensive process that takes into account planning for all your life’s events. It should cover all these facets, from protecting against risk, to savings for kids’ college and retirement to investment needs for business and long-term growth of finances. A financial plan involves chalking out your financial goals, purposes and priorities in life. Then, you draw up a chart of your risks, resources and expenses made to support your current lifestyle. Then you figure out ways to use and leverage risk against resource, and expense against savings, keeping your final goals in mind all the time.
Start with the obvious: Your short term goal. Maybe you’re looking at a debt that needs to be paid off immediately, or something that needs to be purchased like a car or home and you need to accumulate some savings for a down payment. This loan, car or home will negatively affect your family if you are not around. (Would creditors at your doorstep hound your spouse and kids? Would your family be relegated to moving from one apartment to another without a home to call their own?) Clearly, these are important goals that need to be sorted, whether you’re alive or not. Perhaps you have a long term financial goal. You want to make sure that no matter what, your kids are going to college. You may want to leave behind a trust fund for your favorite charity or not-for-profit. You may want to make sure that no matter what, your retirement years will be taken care of without assistance from friends or family. Or you may want to leave the country and settle somewhere else, and spend your retirement years exploring new places and doing new things.
Assess what you have: Now that you have your goals set in sight, take a look at what you have with you. How much savings do you already have? What would you need to do in order to reach these goals? Sometimes, this can seem like a daunting task, especially if you haven’t any savings so far. Don’t worry! You’ve taken the first step to plan and organize your finances and that in itself is a good thing. Many people don’t even know how essential a financial plan can be to sorting out their problems, and make the same mistakes over and over again.
Spending versus Savings: Get on a plan that will help you save towards these goals by taking into account what you already have. There are several great programs out there that can help to bring you on the right track. We won’t make suggestions here, but a simple search through the local library or even a search engine can get you started. In fact, the spending versus savings equation is not complicated if your needs are not too big. Exercising enough prudence, you will be able to chart your own savings plan that works for you.
How to take care of risks: The number one solution to risk management is insurance. So when you’re buying a new home, a better car or planning for a future where your kids and spouse can be taken care of, insurance will take care of it all.
If you have a large enough life insurance policy, it can step in and fill in the gaps in case you “step out”. Because life can be unpredictable, life insurance is a great way to build risk contingency plans in place. Remember that there is no one-size-fits-all policy and therefore life insurance decisions need to be taken carefully and are dependent on your age, the number of dependents you have and your personal economic situation. One type of life insurance is not better than the other. You need to choose the type of life insurance that best suits your situation depending on your personal and financial circumstances. You can consult a life insurance adviser or use many of the online life insurance providers for advice on the best life insurance policy that would suit your personal situation.
Get online life insurance quotes to compare insurance plans. You may find a policy that comfortably covers the risks involved in your future plans for less than $40 a month, especially if you choose term life insurance. And if you choose whole life, it could form a part of your long term savings structure. Good luck on your path to financial security! We hope you achieve everything you set out to do.