Create a personal financial plan step by step
To change something in your life, you need to understand why you need it and what goals you want to achieve. The answers to these questions is a personal financial plan. It is important to "digitize" all your goals: to prescribe the timing of their achievement and the amount. Only then will your dreams be able to come true. You can make a plan in several stages.
1 Turn dreams into goals
First you need to turn your dreams into goals with certain characteristics. For example, you are preparing to become a father, so it became necessary to change the car. How to turn your desire into a goal?
Determine the important characteristics of the car: class, size, fuel consumption and others.
Check market prices.
Evaluate your current car and the amount of money you have accumulated.
Set a deadline to reach your goal.
Then you will have two important numbers:
- time – when you want to achieve the goal;
- money – how much you need and how much you already have.
For example, you want to buy a certain car model in two years. Let’s say now it costs a million conventional units, and you already have 500,000. Let’s say the price grows by 10% per year. This means that in two years you will need 710,000 conventional units (1.21 million minus 710,000 USD).
To simplify, we simply divide 710,000 by 24 months and get approximately 29,600 conditional units (monthly installment). Getting this third number is an important step towards realizing your dream. You can do the same for other targets.
Usually you want everything at once: a car, an apartment, a new phone and a trip to the sea. It is important to spread out your wishes by time frame. For example, a trip can be postponed until autumn, when prices fall, and an apartment cannot be changed while the child is small. First of all you need a car, you can ask your friends to give you a new phone for your birthday. And so feel free to cross this goal off your wish list. After these steps, you will have a list of goals with specific deadlines and amounts.
3 We consider the budget
The next step is to evaluate your income and expenses. First, add up all your income: salary, benefits, tax deductions, additional cash payments. Then count your expenses. Subtract expenses from income and decide how much you can save each month to reach your goals. This will give you the missing amount.
4 Financing options
To get the missing amount, you can use a loan or a loan. There is nothing wrong with taking out a mortgage. I devoted a separate chapter of the book to mortgages. Of course, it is better to borrow as little money as possible and fulfill your dreams with your own funds. How to take into account your finances in a simple way is worth talking about in a separate article.