A financial plan is needed not in order to spend less and save endlessly, but in order to get more for the same money. We tell you how a personal financial plan will help you go on vacation, make repairs or buy a new car.
Step 1. Where to start?
First you need to translate dreams and abstract desires into the format of specific goals, and then soberly assess their value. For example, your family is expecting a baby and you are thinking about a new family car. So far, it's just a dream. How to make it a goal?
Step 2. Assign goals by urgency and importance
Usually you want everything at once. For example, in addition to the car, you dream of an apartment in which there will be a separate room for the child. A home theater would look good in the living room. And in the summer it would be nice to go to the sea. When you clearly prioritize, it may turn out that it is better to postpone the vacation until the fall, when the vouchers will become cheaper. The child will not need his own room until he turns three, so you have time to save up for the initial mortgage payment. And the cinema, it may turn out, is not so necessary for you.
This way you will get a list of goals with priorities, deadlines and the necessary amounts.
Step 3. Estimate your budget
Step 4. Consider different financing options
It is likely that your available funds will not be enough for all important purposes. Then it makes sense to turn to alternative options: loans and loans.
Before taking out a loan, study in detail all the conditions: the interest on the loan, the cost of its maintenance, insurance that may be required from you.
In any case, you need to distribute your income so that there is enough money for current expenses and for achieving the goal (accumulation or repayment of the loan). Economists recommend adhering to the principle that no more than 30% of income should be spent on paying for loans.
After that, adjust your plan: take into account future loan payments, additional income and reduced expenses.
Step 5. Let the money grow by itself
If there is still time before the goal, it is better to save on your own using suitable financial instruments. Choose them based on profitability, risks and deadlines.
For example, federal loan bonds are a reliable and especially profitable instrument if you invest in it for at least three years. A bank deposit carries virtually no risks thanks to the deposit insurance system and can be made for a shorter period.
The main thing is not to keep money in a box, so you will lose part of the real value of your savings due to inflation.
By investing, you will receive additional income — and it also needs to be reflected in the financial plan.
Simple rules
To make a sensible financial plan, you need to:
And most importantly — follow the plan
Making a personal financial plan is only half the job. The most difficult thing is to adhere to it in a disciplined manner. Every day there are many temptations waiting for us, but emotional, impulsive purchases only delay our dreams.
It is necessary to fit into the plan for each item of expenditure. Determine how much money is spent per month on food, travel or a car, payment for housing and communal services and other mandatory monthly expenses, and strictly adhere to the established limits.
If it doesn't work out (especially often it happens at first, until the habit has developed), the plan needs to be adjusted. You can redistribute the costs, you can try to earn more. The main thing is to meet the budget and resist the temptation to "get into the piggy bank." Otherwise, your financial goal will be indefinitely postponed.
All expenses and income should be recorded and referred to the plan daily. This will help keep your finger on the pulse of your financial situation. For convenience, you can use financial planning services.
First you need to translate dreams and abstract desires into the format of specific goals, and then soberly assess their value. For example, your family is expecting a baby and you are thinking about a new family car. So far, it's just a dream. How to make it a goal?
- Determine the most important characteristics of the desired car: engine efficiency, trunk volume, interior spaciousness, and so on.
- Study the models on the market and select several suitable ones.
- Analyze the offers of car dealerships. Trade-in programs or concessional lending can significantly reduce costs.
- Let's say it turns out that you do not have enough money to buy a car of your dreams. And you will need it in six months, when the baby is born.
Step 2. Assign goals by urgency and importance
Usually you want everything at once. For example, in addition to the car, you dream of an apartment in which there will be a separate room for the child. A home theater would look good in the living room. And in the summer it would be nice to go to the sea. When you clearly prioritize, it may turn out that it is better to postpone the vacation until the fall, when the vouchers will become cheaper. The child will not need his own room until he turns three, so you have time to save up for the initial mortgage payment. And the cinema, it may turn out, is not so necessary for you.
This way you will get a list of goals with priorities, deadlines and the necessary amounts.
Step 3. Estimate your budget
- Analyze your income and expenses and calculate how much money you can save per month.
- Calculate how much you need to postpone in order to be able to collect for your goal by the planned deadline. To do this, divide the amount you need to accumulate by the number of months remaining until date X.
- Match the two digits you received. So you will understand if you have enough money.
Step 4. Consider different financing options
It is likely that your available funds will not be enough for all important purposes. Then it makes sense to turn to alternative options: loans and loans.
Before taking out a loan, study in detail all the conditions: the interest on the loan, the cost of its maintenance, insurance that may be required from you.
In any case, you need to distribute your income so that there is enough money for current expenses and for achieving the goal (accumulation or repayment of the loan). Economists recommend adhering to the principle that no more than 30% of income should be spent on paying for loans.
After that, adjust your plan: take into account future loan payments, additional income and reduced expenses.
Step 5. Let the money grow by itself
If there is still time before the goal, it is better to save on your own using suitable financial instruments. Choose them based on profitability, risks and deadlines.
For example, federal loan bonds are a reliable and especially profitable instrument if you invest in it for at least three years. A bank deposit carries virtually no risks thanks to the deposit insurance system and can be made for a shorter period.
The main thing is not to keep money in a box, so you will lose part of the real value of your savings due to inflation.
By investing, you will receive additional income — and it also needs to be reflected in the financial plan.
To make a sensible financial plan, you need to:
- Formulate financial goals — honestly and clearly, in monetary terms and with specific deadlines.
- Divide them according to the degree of importance — do not spare time for this, so as not to stay with the TV for the winter, but without warm shoes.
- Find the best ways to solve them — consider all the options, even the most unrealistic, at first glance.
- Keep records of income and expenses — be aware of your financial condition.
And most importantly — follow the plan
Making a personal financial plan is only half the job. The most difficult thing is to adhere to it in a disciplined manner. Every day there are many temptations waiting for us, but emotional, impulsive purchases only delay our dreams.
It is necessary to fit into the plan for each item of expenditure. Determine how much money is spent per month on food, travel or a car, payment for housing and communal services and other mandatory monthly expenses, and strictly adhere to the established limits.
If it doesn't work out (especially often it happens at first, until the habit has developed), the plan needs to be adjusted. You can redistribute the costs, you can try to earn more. The main thing is to meet the budget and resist the temptation to "get into the piggy bank." Otherwise, your financial goal will be indefinitely postponed.
All expenses and income should be recorded and referred to the plan daily. This will help keep your finger on the pulse of your financial situation. For convenience, you can use financial planning services.