Creating a financial safety net can mark the difference between you staying afloat when the unexpected happens or drowning in financially draining situations that push your finances into the red.
While you may not know what the future holds, financial planning can be the safety net that protects you when you need it the most. We have put together five financial planning tips to get you started.
Your situation is not the same as the next person
The truth is that no two financial situations are the same. While we may give you some practical steps to get you started on building and maintaining a financial safety net, it is crucial to seek financial advice that is tailored to your situation.
Carefully assess where you are at
It's impossible to fix something when you don't know where the problem is. The same goes for financial management. Check your bank statements for a true reflection of what is happening to your finances. Frequently check your bank statements to see how you are improving and where you can cut back. If you do not have a budget in place, it is time to create one.
Planning for every cent will let your money work for you instead of the other way around. It is crucial to know where your money goes. Keep in mind that financial management is a constant juggling act that will need you to adapt to each situation you find yourself in. Therefore, keep working on finding a sweet spot that can work for you and your finances.
Set short and long-term goals
Plan, plan, plan. Having a plan on what you want your finances to do in the short and long-term leaves little room for it to be wasted. Short-term goals are the immediate expenses that you don't want to leave dangling for too long and long-term goals are beneficial for your future:
Short-term financial goals (Examples)
Long term financial goals (Examples)
Making a detailed list of your goals and planning how you can realistically achieve this makes it easier to be disciplined with your finances. The aim is to create a financial buffer between your goals any unexpected expenses through an emergency fund to avoid falling into the red.
Spending less than what you make
Cutting back is a difficult financial decision to make. However, knowing when to scale down can be beneficial to you and your finances. Speaking to a financial advisor can make it easier and practical to find areas on which you can cut back on without forcing yourself to live off beans and toast.
It will also be crucial to do this to find sustainable financial cutbacks. Be honest with yourself on what is a need and what is a want, especially when you are supporting loved ones financially.
Be careful of the interest rate
There is good debt and there is bad debt. Knowing the difference between the two can give anyone the advantage of taking calculated risks when it comes to borrowing money to finance their needs. Before signing on the dotted line when it comes to loans, policies or investments always assess the interest rate.
How will this affect you financially? Will you be able to pay it off in the time frame that is set? Will you be able to maintain the increases that come with investments and policies? These are just some of the questions that you need to ask yourself before agreeing to it. You can always ask your financial advisor to explain how the interest rate will affect you should you not understand.
