Without a concrete Financial Plan reaching your financial goals is just a hope. Are you saving and investing enough? Do you have all your finances in one place to take better decisions? How can you put together a plan based on your investing approach that covers all your goals? Do you have a good tool to make all this happen? Can you make changes as and when required to keep it relevant?
Strategy has to be simple and common-sensical for it to be implemented well. And this is true for Investing and reaching our goals. Except guys in finance are poor marketers; they call it Financial Planning. And then they make it sound as if it will take serious expertise and forever to create one. The branding and marketing of Financial Planning is so mediocre that virtually no one does it. But it is the most important step in reaching Financial Freedom and Nirvana, so my advice to you is f….g just do it.
Most people think is very difficult to make their financial plan. The difficult parts are what we have covered in the previous chapters, knowing what you need and want. Once you have that, what you need is access to a good tool to make it happens. And literally over a cup of tea, maybe two, you can make a great first financial plan which will tell you a hell of a lot of things of how to reach your goals safely and surely. At least the one that is available on MoneyWorks4me.com. will. This chapter will be really a life changer for you if you just do it, so I am telling you upfront, go and subscribe to whatever plan allows you access to this amazing tool that we have built.
Now, for some of you, having to pay any money might lead to postponing doing this essential step. This happens to many of us, we want to go safe - what if it is not worth it, maybe I can find a free tool then I will feel bad or foolish about having paid for something which is available for free. Don’t let such thoughts disrupt the confidence and faith you are building here.
While you create your Financial Plan on MoneyWorks4me and read this chapter you will get clarity and conviction in how you are going to achieve your goals and the important decisions on how you should be investing to make it all happen. This first plan I recommend you build without making any changes to the default values we have set for returns and allocation to equity and debt. After you have read the other chapters, you can revisit your plan. You will see that you can achieve more, much more through this planning process than you imagined possible. And even when you have to make alterations in your goals, you will be able to do so smartly.
Let’s start. You will first see what you need to do and then how you can do it on the MoneyWorks4me Financial Planning Tool, FPT. Start using it by entering the User basic Information.
A Budget for your Living Expenses: If you stayed in a hostel while growing up, maybe for your higher studies, you would know what this is and how important it is. That is unless you had parents who had no time for you and out of guilt and shit load of money that they had gave you whatever you wanted. In which case, if you are reading this then they have either gone broke or written you off or you had some wake-up call. Whatever the reason, I am glad you are reading this. There are far too many people spending more than what they earn every month or at least everything they earn to the last paise. And the others save so little that I suspect it is because they starve in the last week of the month and then are surprised to find that they actually had a little cash to spare , which ends up as saving. I hope you are not one of them. If you are use this step to make changes. Trust me, living within your budget does not mean compromising your fun and joy of living. You have already lived with lesser money than you have today; so tell me honestly did you have less fun then and are you having more fun today. No, but without limiting your expenses to a budget, your expenses increase to match, if not exceed your earning.
Now, if you are asked where does all the money go; is your answer, “I really don’t know”. This is now very difficult to claim because most of your payments are digital and you should be able to get all the answers. Look at your bank statement where all your expenses get recorded thanks to all digital payments being linked to it. With minimal effort you can get the break-up of how much you spend on what. Check it over 3 months to get a better idea of some expenses that are do not happen every month.
Now, to put it all in one place, use the Cashflow tab on the MoneyWorks4me FPT. As you can see in the screenshot below, this is all about how much money flows in eg through salary including your spouses’ earning, how you spend it and how much you save.
Expenses are clubbed under a few headings and you can use the tooltip to know which ones.
Once you have done this you will know what you are saving currently. Whether that is adequate will depend on your goals and current assets-what you own and liabilities-the loans you need to repay. However, as a thumb rule if you are saving less than 30% of your income you may need to...........Read More