Financial planning is as simple as preparing for your future based on your current and past decisions. The best financial plans will take your assets, debts, income and cost of living into account. It will help you strengthen your assets and reduce your liability, empowering you to move toward a bright financial future!
Components of a Strong Financial Plan
If you want to incorporate financial planning into your life, start by addressing each of these components:
Financial planners recommend saving three to six months of income for an emergency fund. This buffer can help you during emergencies or a job loss. Keep it in a liquid account that is easily accessible for you and your family.
Paying down debt is an integral part of any financial plan. If you are overwhelmed by bills, consider reaching out to a non-profit financial counselor who can help you discern the best path forward.
Do you have any employee benefits, such as a matching 401k? If so, max out your 401k matching opportunity to take advantage of free money toward your retirement. If you don’t have a matching program, save for your retirement through other investment options like a Roth IRA.
You are going to need to set extra money aside to work toward buying a house or paying for your children’s education. Look at potential costs and go from there! The sooner you start to save, the father your money will go.
Simple Math Skills
Think of your income as a pie chart; each slice of the pie should go to a different aspect of your financial plan. With some simple math, you can help figure out how much money to allocate toward each financial responsibility. Start by adding up all of your typical expenses. Do they leave you enough room to contribute to savings, loans and retirement? If not, work with a non-profit financial counselor to create a budget that allocates your money in new ways.
It’s easier than you think to live within a budget and honor your financial plan. The free e-book Good and Cheap: Eat Well on $4 a Day gives amazing advice about creating nourishing, healthy meals on a shoestring. You can also save by buying clothing and furniture second hand. Thrift shopping is not only affordable—it can be fun, too! By integrating budget-friendly habits into your life, you give yourself the skills to adapt to changing circumstances.
Do you already have a solid financial plan? There is always room for improvement! Make sure to reevaluate your financial planning strategy on a monthly basis to ensure you are meeting your financial needs.
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Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
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