Today you will learn, in five simple steps, how to build a financial plan capable of improving, once and for all, your financial life. Follow along:
1. Make a diagnosis
Every self-respecting plan should start with a diagnosis. In the same way that a doctor will only prescribe medicine after discovering the patient's disease, we can only improve our financial life after knowing it in detail.
That's what the diagnosis is for: to find out how our financial health is and, from there, to define what "medicine" we should take. To do this, we just need to answer (discover) three basic questions: What is my current wealth? How much do I earn? How much do I spend? Once these three questions are answered, you will know how your financial health is.
2. Define Goals
The second step in planning is to define your goals. The diagnosis tells you where you are, and now you need to find out where you want to go. To do this, it is necessary to define your goals. Since we all have thousands of goals, when it comes to money I suggest you divide your goals into short, medium and long term.
The short-term ones are those you intend to accomplish within a year and are cheaper, like buying a new cell phone, for example. The medium-term ones are those between one and five years, such as changing your car. Last but not least are the long-term goals, such as buying a property or achieving financial independence.
3. Start saving
To get out of your current situation, diagnosis and get to where you want to be you need to have money to spare. That is why the third phase of our planning is to start a savings plan.
Every month you should set aside a part of your earnings for your savings, so that you will have the necessary money to perform the next two stages of planning. If you don't know how much you should save, I suggest you start with 10% of your net income and gradually increase it. Ideally you should save 30% of your income.
4. Eliminate debts
Debts not only steal our peace of mind, they also steal our dreams!
Therefore, now that you have a savings plan, your first goal should be to pay off your debts, especially those with higher interest rates. Then you will have better financial and psychological conditions to build a prosperous financial future.
5. Invest with intelligence
Now that you have paid off your debts, you can use your hard-earned money for something worthwhile: your quality of life, today and in the future! Since the money you have saved will no longer be used to pay off your debts, you can now use it to achieve your goals. You will do this through investments!
If you intend to buy a new smartphone, change your car, or have money to make a down payment on your dream apartment, saving is not enough, you have to invest the money saved. In this way you make your money work for you through the return on your investments.
Conclusion
Did you see how simple building your financial planning can be? In just five steps you can change your financial reality and provide yourself and your family with the best that money can offer: making dreams come true, with quality of life and in a sustainable way. Now it's time to get down to business! Good luck and see you next time!
