The importance of financial planning cannot be overemphasized. It is a continuous process aimed at enabling people to make sound financial decisions.
The consequences of not planning your finances are dire. That’s why it is important to ensure that you have a financial plan in place – if you want to attain financial freedom.
The good news is that there are many companies and individuals who offer financial planning services.
If you’re residing in Melbourne, Australia, a good starting point is by looking for Melbourne financial advisor North East Wealth. Although you can do it by yourself, working with a professional almost guarantees the success of your plan.
Below are some of the ways to master the art of financial planning:
1. Regulate your expenses
If you are the type of person who finds themselves struggling to survive before the month ends, then you are living beyond your means. Most people who find themselves in this situation are those living from paycheck to paycheck.
Money doesn’t stay in the accounts of such people. Immediately you receive your salary, it’s gone in a matter of days. As much as we live in a world driven by instant, gratifications, it is possible to maintain financial discipline.
Start by having a budget. How do you create a budget? The best way to do that is to classify your expenses in the following category:
- Those that are urgent and not urgent
- Fixed or variable
- Avoidable and unavoidable
- Luxury and necessities
2. Spend less than what you earn
One major reason why most people find themselves struggling with finances is living beyond their means.
It doesn’t matter how much you are being paid, spending more than what you earn will only draw you into debts and poverty. Avoid the temptation of trying to please people or compare yourself with others.
Besides that, always demand to be paid what you are worth. You can do this by finding out how the current salary scale for your job. This is because some employers take advantage of your ignorance to pay meager salaries.
3. Create a personal balance sheet
A personal balance sheet will allow you to know how much is getting in and how much is going out. It will also enlighten you on what you own and how much you owe others. This is a perfect way to determine your net worth.
Before starting to create your balance sheet, ensure you have your bank statements as well as other documents to prove liabilities.
4. Pay off your credit card debts
Credit card debts are a major obstacle to financial freedom. As much as they are convenient to use, credit cards can turn you into a debt slave, making it difficult to plan your finances.
You need to come up with a strategy to clear all your credit card debts and move to bigger financial goals.
5. Create an emergency fund
It is difficult to know what will happen tomorrow. Learn to plan for it. Set a small percentage of your earnings to cater for future emergencies. Otherwise, you will find yourself spending all your savings and investment when an emergency strikes.
6. Review your insurance covers
This is another great way to manage and plan your finances. Most people get lured into purchasing insurance covers that they do not really need. For instance, it doesn’t make sense to purchase life insurance if you don’t have dependents.
At the end of the day, you will find yourself paying a lot of money in terms of insurance premiums. Review your insurance covers and remain with only those that are necessary.
7. Save and invest
You need to develop a saving culture as part of your financial planning process. Don’t be the person who spends everything after earning.
Good financial practices demand that you spend what is left after saving. Besides, ensure that you search for reliable opportunities to invest your money.
8. Plan for your retirement
This is an area most people tend to forget. There are several ways through which you can contribute to your retirement. It is up to you to decide which one best suits your needs. You can also talk to investment experts to find out more about retirement plans.