Without a basic financial plan you will never have control of your financial situation. How much are you putting away for retirement? How much is in your retirement account? What are the interest rates on your credit cards? If you don’t know the answer to those questions, you’re in need of a financial plan. Here now are the four basic points that comprise any financial plan.
In a budget, you list the amount you make and the amount you spend. Figuring out how much you make should be easy. You get your two monthly paychecks and add them together. That’s your total. To see how much you spend, you’ll need to make a list of all of your bills and miscellaneous expenses. If you use a debit or credit card to make all of your purchases the process will be easier.
After you’ve done this the next step is to see how much money is left over. The goal is to have as much of a positive cash flow as possible. If you don’t have any or much left over, you’ll need to make changes to reduce your expenses.
Debt can drain your bank account as well as your motivation. The problem with debt is that you’re always paying for stuff you already bought and probably regret buying. Not only that but you have to pay interest for the pleasure of having what you bought early, since you didn’t save up to buy it. Make sure and set money aside in your budget to pay back your debts.
Everyone should have a retirement account. Social security may not even be there when you retire so you cannot rely on it. Even if you do get social security at retirement, it may only be a few hundred dollars and not enough to cover your rent or mortgage payments. You should have 10% of each paycheck put away for retirement automatically. If you’re closer to retirement and haven’t started yet, you’ll need to put about 25% of your income to catch up and have enough.
Insurance is an added expense that you may think is a luxury. But you would be wrong. Insurance is a necessity unless you have hundreds of thousands of dollars in savings. Make sure and have enough insurance because if something happens and you are under-insured or not insured at all, it can ruin your financial future for years to come. Be sure and have health insurance for every member of your family or start shopping health insurance marketplaces online. You can read up about this by checking out this article by Richard A. Kimball, Jr., founder and CEO of HExL, Inc., a company whose objective is to make healthcare more affordable for everyone. And also be sure to have every car sufficiently insured. You can’t get insurance after a disaster occurs, so it’s better to be safe than sorry.