3 ESSENTIAL STEPS TO A FINANCIAL PLAN

3 steps forward may not seem like much but the average person hasn't moved yet.

It is common to us all to have various number of alternative ways to appropriate our finances.The problem however is that the vast majority of us have a limited amount of financial resources to meet all our various desires.This therefore makes it mandatory for us to efficiently allocate our resources as much as possible.Key to achieving this is to determine the goals that are most important to us.I hope we still remember what we were taught in elementary Economics class about the scale of preference.

Step One- Set financial goals

Setting financial goals is the absolutely essential first step to a financial plan.This defines the reason for the very existence of the plan itself.We must set SMART goals.

S-  specific

M- measurable

A- achievable

R- realistic

T- time-bound

A study was carried out to determine the key factor that made successful people successful.The researcher interviewed hundreds of people from different backgrounds and socioeconomic walks of life and found 58% of them had achieved average levels of financial success. Of the top 13%  of subjects classified as having above average levels of  financial success,he found 3%  to be extremely successful.He then discovered that what these 13% had in common was that they were goal setters.The second most important thing that they had in common was that they were planners.For the 3%, he discovered that the key characteristic was that they wrote down their goals!

Step Two- Determine your current position.

Determining your starting point is equally as important as setting goals.This step answers to the question,"what do I have to work with that is going to help me achieve my objective?". The answer you give to this question must be consistent with the Reality Principle which states that "you must deal with life as it is not as you wish it were or could be". Most people live in a world of partial-self delusion, or even fantasy with regard to money.They wish, hope and pray about their financial futures while at the same time,deep in their heart, they know their dream will never materialize.

Most people have two primary resources available to them;their current income and their current assets.Their discretionary income[the portion of ones income after all obligatory payments are made such as tithes, mortgage,savings,debt.etc] must be allocated efficiently to those areas that will help them attain their goals.The same is true of assets.Your assets must be in line with your goals otherwise the consequence will be inefficient money[money that doesn't work hard for you]. Achieving financial independence requires the elimination of inefficient money.

Step Three- Develop a step by step written plan 

.Once you know where you are and where you want to go, the next chapter is to develop a step-by-step written plan to achieve your goal.This written plan must be outlined in actionable steps with specific time frame within which each  step must be taken.Milestones should be built into the plan so that your progress can be measured on a regular basis.

These 3 simple steps are all it takes to put in place a financial plan of action for one's financial future.The sad reality however is that majority of people will not take these steps until it is almost too late.A lot of people only begin to think of retirement just when they have a few years to retire.The ideal thing is to begin planning for your retirement the very day you commence work. Stories abound of people who have earned huge salaries for years and at retirement or termination of their appointment find it difficult to maintain their desired lifestyle and some often end up in dire financial straits.

IMPLEMENTING YOUR BUDGET

Becoming a good money manager requires us to take certain actions.To begin with. it is advisable to open a checking account[current account] and transfer the amount of your total budgeted expenses from your salary account to this account .Use this account entirely for payment of bills,shopping, and other expenses.Payments on this account should be made entirely by cheque or debit card.With the cashless policy now in force, this approach also saves money on charges for cash withdrawals in addition to helping you track your expenses.Let your savings and other contributions come directly from your salary account.What is left in your salary account[your balance] could be used partly as a contingency reserve and also to increase your savings.

A simple spreadsheet[MS Excel] template can assist in your money management [for a free budget template in Excel,send email to hillcrestpro@gmail.com].Some smart phones have some kind of money management app.Otherwise you can carry a small pocket size diary to track expenses.One thing to avoid is impulse buying.Nothing ruins budget plan more than impulse buying.Always avoid carrying cash but instead carry your card and cheque book.

Maintaining a budget work smoothly will definitely require regular review.Find our areas you are spending too much and if possible increase your savings.To achieve your goals will definitely require a few sacrifices.Like they say,no pain no gain.But at the end of it,it is always well worth it. 

PERSONAL FINANCE-THINGS TO KNOW ABOUT BUDGETING

Budgeting is an essential ingredient in managing our personal finances.A lot of people today wonder what happened to their salaries because often times they do not have a budget for the income but just take the expenses one at a time.One of the benefits of having a budget is that one must have predetermined the priority to give each category of expenses.

The first step is to set your goals.Your goal could be saving up for a project, liquidating an existing debt, taking up a mortgage,saving up capital to start a business,buying real estate,etc.The next step is to determine your monthly net income.This is arrived at after deduction of tithes and other deductions like NHF,etc.The next step is to review your past monthly expenses,rationalize and put them into categories like food, automobile expenses, electricity, phone,medical, school fees,rent,etc. By the nature of our local system, things like rent are prepaid annually.This must be considered in your budget.You can create a sinking fund account where you deposit the equivalent of your monthly rent.Same can be done for school fees.There are policies offered by insurance companies that are specifically for things like these.

Below is a list of generalized budget categories and recommended percentages.The categories or percentages may vary from individual to individual.

FOOD[20%]
The cost of food locally is a bit on the high side.So depending on some factors including the number of mouths to be fed, the food budget shouldn't exceed 20% of your monthly income.Some tips on how to save on food include:
*Shop for food in bulk at the local fresh food depot in your city.
*Always shop with a prepared list.
*Contrary to once held belief,shopping at the large grocery stores at the malls is a lot cheaper and they also sometimes offer customers discounts and many have a customer loyalty scheme.

RENT[30%]
Rent in our cities today are quite on the high side.However we  should try not to exceed 30% of our income on rent.For those who receive annual rent allowance from their employers,it is a bit easier to make the bulk payment required by the landlords.For those not so lucky, they can take up a policy with one of the insurance companies who offer such products and pay in the equivalent of your monthly rent which is determined by dividing your annual rent by 12.

SAVINGS[10%]
Not less than 10% of your monthly income must go to savings regardless of the situation.This based on the principle of pay yourself first.Not having a savings culture will lead to a borrowing culture.Having the mindset of saving will help you cut frivolous expenditure on lifestyle and entertainment.The best way to save is to have direct deductions  on your monthly income by your employer[outside pension]..However, this service is not offered by most employers locally.A good alternative is to take up a  savings policy with a reputable insurance company and place a direct debit on your account.If you lack the discipline to consistently set aside a percentage of your income monthly, then you will never ever be financially independent.

MEDICAL EXPENSES[5%]
Some employers cover their employees medical expenses.For those not so lucky, you can set aside not more than 5% of your income for medical expenses.

CAR MAINTENANCE/TRANSPORT
One way to save on your car maintenance expenses is to find a good and reputable mechanic which is not an easy task nowadays.But we can do this by asking for referrals from friends and colleagues.Fuel is another portion of car maintenance which have gone up lately because of the partial removal of subsidy on fuel.One can also take public transport from time to time to reduce expenditure on fuel and avoid nagging traffic jams.So it is really hard to put an exact percentage on this category but you can determine how much will be budgeted by reviewing past months expenses.

ENTERTAINMENT/RECREATION[5%]
Recreation is a necessary part of life.This include visits to cinemas,parks,events and shows,etc and even subscription for cable television.However not more than 5% of your monthly income should be spent on this category.

MISCELLANEOUS[10%]
All items that did not fit into the other categories should come here.This could include phone expenses,blackberry charges,clothes,dry cleaning,internet,electricity,water bill, security levies, etc

BALANCE
Total up your budgeted expenses and subtract from net income.If you have anything left,fantastic.If not, you will need to cut down some of your expenses to have a good financial bill of health.

For free consultation and free budget template call 08039286522 or email hillcrestpro@gmail.com

FINANCIAL PLANNING SELF ASSESSMENT

*The following questions will help persons currently in paid employment determine the level of their future financial security and that of their loved ones.

1.How long have you been in paid employment?
2.What portion of your gross past earnings have you put aside for your tomorrow?
3.Have you decided the age at which you would love to retire from paid employment?
4.Have you put in place a plan towards your retirement?
5.If the answer to 4. above is yes, have you recently reviewed the adequacy of the plan in light of your present circumstances[salary increase, additional responsibilities, additional goals,etc]?
6.Does your existing plan cover personal risk such as accident,permanent disability and death at no extra cost?
7.Does your plan accommodate next of kin[children and other dependent relatives]?
8.Does your present plan offer you tax benefits such as tax rebate and non-taxable interest?
9.Does your present plan grant you the liberty and freedom to determine your contribution or is it rigid?
10.How do you currently pay for your cumulative recurrent expenses like annual rent, children's school fees,etc
11.Would you love a plan that will make it easy and convenient for you to settle these obligations conveniently as at when due?
12..Have you considered a back up plan to cater for the vagaries of life?

Your honest answers to these questions will help you determine your present level in your march to financial security.

For free consultation  email hillcrestpro@gmail.com  or call 08039286522  http:/about.me/clems