PERSONAL FINANCIAL PLANNING FOR BEGINNERS

While some individuals learn about personal financial planning or at least basic budgeting early on, many of us need a little help getting it right. Financial planning is not just about saving money. It also crucially addresses what income we have and what we should spend money on, when and how.

There are several steps and actions all individuals, including beginners, can take to get financial planning right.

DRAW UP A BUDGET

The first and crucial step is drawing up a budget. Without one financial planning is impossible. Drafting a budget is not complicated. You need to list your income and all your expenses (be careful not to leave any out). Your income less your expenses is the amount you can save each month.

Once your budget is in place you need to control your spending and work within your budget. You can update it as your income and expenses change but expenses should never exceed income. If they do, you will get into debt.

CLEAR YOUR DEBTS

If you are paying off loans or credit card accounts, do not just pay the minimum amount needed. If you do this, you are paying both the debt and significant interest. By paying more than the minimum each month, you pay off the amount faster and reduce the interest you pay overall.

TAKE OUT INSURANCE

Insurance protects you from unforeseen, often costly, losses. Damage and theft do not only happen to other people’s property. Any asset you have such as a car, home or possessions are at risk. There are also other forms of insurance that protect you from legal costs, such as public liability cover.

Even if you are young, it is wise to take out some form of medical cover to protect you from expenses following illness or injury. Nobody is immune to disease and accidents and the resultant expenses can be crippling.

No matter what insurance you need, it pays to shop around and make use of websites that offer comparison and free quotation facilities.

REDUCE YOUR EXPENSES

All our expenses must be listed before we can draft an effective budget. This is an ideal time to look at each item and ask if you need it. There is a difference between a must-have and a nice-to-have.

If something is a necessity, find out if you can I get the same or an equivalent product or service for less from a different supplier. If an item is not necessary and you need to save money, it should be discontinued permanently or until your income increases or other expenses or debts fall away.

PLAN FOR YOUR RETIREMENT

It is never too early to plan for your retirement. The longer we leave it, the less money we will have to live on when we are no longer working. Thanks to great strides in healthcare we are living longer and need financial resources that can sustain us longer post retirement.

If you are unsure about your options, consult a financial advisor who can discuss what is available and most suitable for you.

MANAGE EXTRA FUNDS

Having more money than is necessary to cover expenses or financial responsibilities is an enviable position to be in. However, it can be tempting to spend it on a large luxury such as a holiday or new car or to fritter it away on small things without noticing.

To protect your present and future you need to invest excess money even if you have a retirement plan of some kind and a savings account. There are a range of short and longterm investment options to choose from including stocks, shares, property or gold.

If you are unsure what forms of investment that offer good returns are suitable for you, consult a professional who can guide you in this regard.

PLAN YOUR ESTATE

Like retirement planning, you do not have to wait until later in life to do your estate planning online. Much as we do not like to think about this, dying without a clear estate can cause difficulties and may result in financial hardship for those you care about. Seek the advice of someone who can advise you in terms of the disposal or distribution of your assets.

Finding someone who can both provide advice but also be a trustworthy character might seem difficult. By looking for a well reviewed estate planning attorney castle rock (or elsewhere more relevant to you) will ensure that you find an expert who is there to put your mind at ease and organise your holdings in a way that best suits your wishes.

IT IS NOT AS HARD AS YOU THINK…

Following these guidelines will make life much easier. Start with an accurate and realistic budget and build from there. Setting things up takes time and effort but will make life much easier overall. Not doing so can have devastating effects that can affect life for many years.

Remember that, although financial control and monitoring are important, budgets and plans are not carved in stone. They can and should be altered as your circumstances change.

Finally, you are not alone. If you need help, ask! There are a host of specialists out there who will be happy to guide you in this crucial process.