Individuals who use a financial plan are more financially secure and attain financial security compared to those who don’t.
It has been said that to fail to plan is to plan to fail. Do you want to be more financial secure and to make some good strides in having important assets? If your answer is yes then you need have a plan of your money.
This is not for the rich only but it’s for everyone who wants to be rich one day. It is actually a discipline of the rich.
A financial plan is a tool an individual uses to plan for his or her goals as well as to manage his current and future monetary situation. It is the way to achieving life goals and attaining financial security as one progresses in life.
The following are the steps to follow in making a financial plan;
1.Identify your goals
The first step of establishing a financial plan is coming up with goals.
Goals differ from one individual to other. Some want to start a business yet others are thinking about how they have to raise funds for college. Others are thinking about how they can buy a plot and so on.
Goals help us to understand what we want to achieve in life.
It’s normally said that the only poor person is the person without goals.
These goals can be either short term or long-term.
Short term goals are the ones you want to achieve in a short period, particularly a year. These goals may be to start a business or to rent a larger house.
While long term goals refer to what you want to achieve in the long run perhaps in five years or even in ten years. you get the idea. Long term goals may be buying a piece of land, having an apartment, saving up for college fees for kids among others.
2.Classify and prioritize your goals
After identifying your goals classify them in this two categories (short term and long-term).
Also rank your short term goals in order of your preference. Ask yourself what you want to achieve first and what you want to achieve last in the short term then make a list.
This will help you in accomplishing one goal at a time especially when the income is low. Remember also goals must be SMART. That is specific, measurable, attainable and realistic.
Evaluate your Financial Status
Your financial status is your net worth, which is your personal assets minus your personal liabilities.
If you have a positive figure you are in a better position towards achieving your goals. However having debts to clear doesn’t mean one cannot achieve goals, first work out the outstanding debts then move on.
This is the most crucial part of making a financial plan.
Generally individuals get income from their various jobs, businesses or any other way of earning.
The difference between successful people and unsuccessful people mostly has its roots in budgeting.
Simply plan on how to spend your money. Make a list of how to go on before spending for instance allocate money for rent, fees, basic needs, and clothes, fare, pocket money among others. A budget mostly covers what is necessary to be done in a short period like a month. It is important to stick to the budget.
if you want to learn more about budgeting click this link
4.Save towards achieving your goals
Do not place all your income on the very basic needs and wants only. It is important to save some towards achieving your goals.
No saving means no achievement of these goals. Because after all they will require money in order to be established.
Allocate some money for your short term and long-term goals depending on the amount of income you earn.
It is at this point where financial institutions especially banks come up with different saving schemes in order to help their members achieve their goals.
These schemes cover different subjects such as property buying, secondary and tertiary education, car ownership, capital for business etc.
5.Manage your Loans
Sometimes getting a loan is a good way of boosting a business or any other profitable project when lacks enough capital.
Loans therefore can help you achieve some goals.
You however have to manage your loan and repay it in time to ensure that the bank will not interfere with your savings or assets when demanding back the original amount and the interest.
This is because the interference will negatively affect your goals or bring down what you have achieved.
6.Have a Medical Cover for your family
In Kenya the NHIF is the most common medical cover used.
It is a compulsory deduction on employment income, however you can arrange other more secure health insurance through private insurance firms like Jubilee, Britam among others.
This is important especially for a family since sickness is uncertain and regardless of the level of hygiene, the unexpected may occur. When the worse occurs without this cover the family or the individual may be forced to sell important business assets or use all the savings which were to be used in achieving the goals.
Set aside an Emergency Fund
Life is full of expectations such as being sacked from employment, business failure or even disasters. In such times an emergency fund will ensure that you still survive before regaining your economic stability once again and you will not need to access your savings which are for your goals.
7.Have a pension Plan
Old age usually comes with heath complications and at this time one is unable to make use of his energy and skills. Pension arrangement will help you when you are old with some income and you will not need to sell off some of your property or assets which you saved for and achieved.