Most of us tend to wonder through our lives without a financial map. No destination in mind, just paying what we can today and hoping that there will be enough for tomorrow. If you are driving that may be fine for a Sunday cruise but would anyone head out to their new retirement home without first checking out if that is where they really want to spend the rest of their lives and just as importantly how to get there. That is exactly what you are doing if you have no financial map. We plan vacations and birthday parties, but not our financial future.
Financial planning is not only for people that have extra money to invest, but a necessary map for all your spending and saving regardless of income. As with all maps to be of use you must know where you are now, where you want to be, and what you have to do in order to reach your goal. Planning and establishing financial priorities lets you can gain control of not only your future but also your today. And today is a good time to start on your road to financial freedom and a future free of financial worries.
By knowing what your current financial status is, you are in control and in a better position to plan for immediate and long term expenditures. Your wants will become reachable goals and your future will be more secure. Looking at it another way, your financial planning is your map to what you need, how much you need, and when you need it. With planning, you are much less likely to face financial hardships. With a good financial map you will be able to weather the inevitable bumps in life such as a costly illness. Your retirement can be comfortable without having to depend on the government or others to care of you.
The first step is to know where you are now and seeing how you got there. Keep track of all expenses for at least a month and put them into categories. Where you spend, especially those little cash purchases, can be a surprise. Seeing where you spend and on what makes it much easier to decide on where to cut back. Sit down with the entire family and discuss where spending can be cut. Discuss your weakness buying, impulse buys, or must have newest toys. Be honest. This is not a time for accusation, it is a time for mapping your family’s future happiness. Set a budget and see how it goes for a month, again tracking every purchase. Nobody gets it right the first time. You will probably find more ways of saving, but just as often people go overboard and budget too tight the first time around. A good budget takes months. Take the time, it is worth it both now and will definitely be worth it in the future.
The two most important questions that have to be answered before a financial map is complete are “Can we live comfortably within this budget?” and “Are these our real financial goals?”. If you are overly severe on cutting back expenses, the budget will fail. If your goals are not realistic then the frustration of a goal always just out of reach will make the effort not worth the cost. Time changes everything including budgets and goals. Don’t let your budget become locked in stone. Your financial map is a living, changing, guide to maintaining your priorities and goals. You need to do it. You want to do it. Take the first step and find out how satisfying it is to ease the financial stress of today and ensure the financial security of your tomorrow.