Simple 4 Step Guide To Building Your Personal Financial Plan
Are your finances in shambles? Do you want to be financially independent? You don’t know where to start? Then you are in the right place.
In my opinion, money should secure your future and give you and your family the ability to live your best life. If you think this is the case, then we must be intentional with our finances.
Everybody who has or intends to get an allowance or an income MUST have a financial plan to achieve financial independence.
This article will take you through how you can make a financial plan to ensure financial independence for yourself and your family.
Step 1. Current Financial situation
To know where we are going we must know where we have come from.
The first step toward wealth creation is to identify your money mindset and deal with it.
What do you think of money? Does it make you smile? Would you rather not talk about it or are excited to talk about it?
Demystify any money myths you have. Like “That money is hard to get and”, “expensive things are for others, not you”. Create an abundance mindset toward money so that you have a good relationship with money. That is what the wealthiest people do.
“Wishing will not bring riches. But desiring riches with a state of mind that becomes an obsession, then planning definite ways and means to acquire riches, and backing those plans with persistence which does not recognize failure, will bring riches”. —
Knowing what the problem is will give you an idea of what you have done well and what needs to be changed, and what needs to be stopped.
To understand your finances, you need to have a way to track your expenses and allocate them to the right ones. The best tool for this is a budget.
Step 2. Setting Financial Goals.
Now that you know where you are in your financial journey. It is time to decide on what you want to do about it.
Goals are the expected result of your financial plan. They will lead you to be financially independent and if you dare to dream, to be wealthy and rich.
Good goals must be SMART. Your goals should be specific to what you want to achieve.
Ambiguous goals do not give you the motivation to achieve them. Be as specific as possible.
You must have a value or an amount. Having a specific value makes it measurable.
Evaluating the progress towards your financial independence target is easy.
Of course, your goal must have realistic timelines. That you can determine the current value versus the future value of the goal.
Example of a goal
To increase my monthly income from the current Kes 100,000 per month to Kes 500,000 in order to buy a of Kes 15 million home in on Kiambu road by December 2025
You must know the rate of growth and interest rate required for your current income to get to the anticipated goal income by calculating the present and future value of money. A good financial advisor can simplify this for you.
Step 3. Develop a Financial Strategy
What financial steps do you need to take to achieve your goals and be financially independent?
While you are identifying your current situation, you already know what money mistakes led you to the current situation. Write down the actions we can take up to break the bad habits.
We all have different goals, that need money. The strategy is usually around actions that will assist in Income generation and Accumulation of assets
If you are beginning your financial independence journey. Below are some of the common strategies that you are likely to get from your financial advisors.
- Build an emergency fund
- Build up your savings
- Take up insurance(life, medical, home, motor insurance)
- Manage your debt:
- Invest your money to grow it.
- Plan for your retirement.
- Establish estate planning.
Step 4. Evaluate and review your financial plan frequently.
Some of us are not where we would like to be financially so there is work to be done to get to financial independence.
Since it is a process we must have a way of checking the progress on the plan and adjusting where we need to correct it in order to get to the wealth.
Schools don’t teach financial intelligence, so you need to educate yourself on the best financial strategies that work for you. A good place to start is by learning about financial planning.
To achieve financial independence and create wealth for yourself and your family, you need to
Implementing your financial plan. Be consistent in following it and you will achieve financial independence and create wealth for yourself and your family,
The best time to develop your financial plan was five years ago, and the second best time is now…I know cheesy but true.
Contact us if you need help with your financial planning
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