There are keys to financial planning, to start your engine of savings and financial success. Pick up any number of books on the subject and you will find savings tips. There are a common threads on this line of thought, and here are the major “keys”.
1. You must have a complete picture of your personal financial situation before you can do financial planning. You can plan, but until you are in a positive cash flow, you cannot enact any of your plans. So, the first thing to do is calculate your net cash flow. Total up all you owe, and all you earn. For the “owe” column, include bills, upcoming expected expenses that you will have (like if you are expecting a baby), and normal living expenses like food, gasoline, medical, and clothing expenses. For the “income” column, include all money you expect to receive (after taxes). Do these calculations either for a month or a year. If you do it for a year, divide by 12 to get an average monthly cash flow picture. Once you have your totals, deduct the expenses from the income totals. This is your net cash flow. If it is a plus figure, you are above the line.
If it is a negative figure, you are below the line and need more income. If you have a plus figure, then you can do your financial planning. If you have a negative figure, you must find ways to generate more income before you need to do planning. Obviously, everyone wants to be in the plus cash flow area and plan for getting more money out of life. So, don’t get discouraged, just sell something, lower your monthly payments through negotiation, or get another second or third job. You want to do some planning.
2. Second of the keys to financial planning is to do some research before you try to invest your money. A savings account may not pay much interest, but it is secure. Money market funds are another place to add savings up. If you play in the stock market, don’t think of it as play. It is serious business; you need to learn how to work it. Don’t count on the casino slots! Learn to take care of your money. Maybe the best investment now is a house. Look around to see your options.
Do not sit on your laurels and hope for the best. You can work your investments. Think of every investment as a little employee out earning money for you. If they don’t, you replace them with one that will. Be flexible, and continually educate yourself about money. Read books, read websites on investing and financial planning.
3. Third in the keys to financial planning is to stay active. Do all you can to earn more, invest more, and watch your investments like they were in your top coat pocket. Don’t count on someone else to earn you money!
That’s all the keys you need. Know, Learn, and Guard.