Financial worries sometimes create stress, and often that stress is unnecessary. Organization and a little disciplined thinking would help dispel it. With a financial plan, your goals come into clearer view, and so do the strategies you need to implement in order to reach them.
Starting to think about the basics of a financial plan involve some steps you can easily take yourself. Even before you talk to a financial planner, it will be helpful to do some of these:
- Begin with an overview of your net worth, listing all your assets, including your savings and retirement accounts, as well as your debts.
- If you don’t have a budget, you can create a basic budget framework by assessing your monthly income and your monthly expenditures.
- Then think about goals, both short and long term, and prioritize them. Do you want to travel? Have children? What kind of retirement do you imagine? For now, this is more of a “visioning” exercise — think about goals, not about what they’ll cost.
- Now you’ll be able to look back at your cash flow — how much money is coming in, how much is going out, and where it’s going — in a little more detail. How much do you want to spend on necessities? How much on luxuries? How much on savings and debt repayment?
- What spending can you see you could trim, so as to better work towards achieving the goals you really value the most?
- Don’t forget to prioritize debt repayment. High-interest debt can become a treadmill that keeps your goals at a distance.
And finally, don’t forget your ability to access the greatest wealth-creation tool ever imagined by human beings — by investing in stocks for the long term. When you invest in equities in a disciplined and dedicated fashion, you are harnessing all the creativity and entrepreneurial spirit of humanity, and over the centuries, this has been by far the best way to grow wealth. Small contributions made consistently to stocks over a working lifetime can make the difference between meeting and missing those long-term goals.
