You must plan your financial future and it’s not negotiable and starting early is the key to have a secure financial future.
There’s a path that leads to a secured future which you must consciously follow through because no one stumbles into financial independence.
It is a must to plan your financial future and there are secured and guaranteed paths to achieve this goal.
There are several ways or things to do get you there but you must have a specific plan that is unique to your what you earn and your personality.
When planning your financial future, you must consider short-term, mid-term, and long-term plans which are the paths that lead to a secured future.
One of the reasons you should plan your financial future is to be financially secured when you are aging and have retired from physical and active work.
You must have a short-term, mid-term, and long term-plan because you do not want to get stuck in the vicious cycle of paying debts, servicing the interest on loans, and looking for a quick fix.
One of the most effective ways to plan your financial future is to do an annual analysis of your goals and objectives and how well you fared and to make possible adjustments here and there for better results.
Key Points To Note About Your Financial Plans
- A financial plan is planning for your retirement.
- You must start early and must have short-term, mid-term, and long-term plans.
- As you plan your financial future, plan with what you earn, and your plans must conform with your personality.
- Financial plans start from your savings and grow into large capital that you can invest in.
- Practice annual analysis of your financial goals, objectives, and projections to see how well you are doing.
Short-Term Plans Plays A Vital Role As You Plan Your Financial Future
Short-term financial plans are important because it is small, short, and easy to achieve. When a short-term financial plan has been achieved, it births motivation to set bigger financial targets.
Achieving financial goals requires confidence and foundational knowledge of how finances work. When you have hit a short-term goal, it gives the hunger to want more.
Tips To Note In Setting Short-Term Financial Goals
Block the holes
Analyze your one week or month’s expenses and take note of your spending habits.
You will be amazed at the unnecessary things you spend money on and what you could have saved or put to better use.
Calculate how much you spend on sweet mouth (emotional Spending) and hosting friends and families and on transportation to visit friends, see movies, and on anyhow waka.
Blocking the holes means taking note of everything you spend money on and making the change.
Plan Your Financial Future – Short-Term – Setting safe-Savings Plans
Yes, you have blocked the holes by doing proper analyses on all the things you spend money on. Now it is time to create a budget for the things you need to spend money on.
The unnecessary money you realized from what you have highlighted from blocking the holes. It is time to put those monies to good use.
Identify key areas where to put those extra monies, and one of the safest things to do is save that money for about a month and see what you have saved.
Discipline yourself for the next three months and put more monies into your savings plan.
In the third month whatever you have saved becomes your safe-savings plan.
Your safe-saving plan has motivated you to consciously save more because you have seen how effective the system works. After all, you didn’t have to cough the money or pass through the stress that you have saved.
Draw Out A Safe Budget
In the early stages of saving, you do not want to overshoot your luck because you have real needs that you should meet and a life that you should live, and will become frustrated if when you take away some things that make your personality.
Drawing a safe-budget puts the brakes on excessive or emotional spending.
The safe-budget guides you as you plan your financial future till your retirement.
Do your research and read up on budgeting because budgeting is a lifetime thing.
Make An Emergency Fund Plan
Emergency funds are monies you set aside for emergency use.
These are funds you should use to meet unwanted expenses, things your budgets didn’t capture. Emergency funds are savings because it is still your money, and if it is not used will be added to your savings.
It is always nice to keep a certain amount of money handy to avoid getting stranded.
You increase your emergency savings over time, that is enough to cater to your basic needs in times of unemployment.
You can find financial organizations that are willing to help you save those monies to gain more interest that you can withdraw at any time.
Pay Off Debts
There are two schools of thought here.
One says; pay off debts; be debt-free and start from zero then grow.
Another is, growing your savings or investment and your emergency funds because if you do well you can pay off your debts.
Here both principles work best based on our unique personalities. So, choose which one makes more sense to you or do a little of both.
There are two thoughts on debt payments.
Debt Avalanche is listing the debts based on their interest rates and paying up the debts with the lowest interest rates to the highest then paying only the minimum on all but your highest-rate debt. Use any additional funds you have to make extra payments on your highest-rate card.
The Debt Snowball works by paying debts from smallest to highest interest. The philosophy here is to give you a sense of accomplishment from the cleared debts.
A short-Term financial plan is about clearing debts, becoming debt-free. The short-term phase is working on the financial strategy that will bring you out of debt.
The motive for a short-term plan is to get out of debt, and whatever money you make is aimed at becoming debt-free.
Short-Term Financial Plans: A Major Factor As You Plan For Your Future
Short-term financial plans are ensuring that you eliminate bad and emotional spending habits that put you into debt.
Plan your financial future by working on short-term plans that will make you debt-free.
Mid-Term Financial Plans
The mid-term stage is that phase where you paid up all debts, and you become debt-free or at least well on your way to being debt-free.
Here you have understood the principles of budgeting and how to effectively save up and manage your emotional spending and freeing up funds for emergency needs.
In this mid-term stage, you must plan your financial future to getting assets and making huge investments that will make you financially independent.
Mid-term financial plans bridges short-term and long-term goals.
Things To Note About Mid-Term Financial plans As You Plan Your Financial Future
Building A Secured Financial Base
The best way to secure your financial future is to ensure that you are on the path to securing a strong financial base.
A secured financial base in the Nigerian term is when money meets money in your hands.
Your expenditure is lower than what you earn.
Here you can now concentrate on investment plans and insurance plans that secure your retirement, and health.
The mid-term phase is where you begin to have a feel of being wealthy and at peace, because at this stage you have successfully paid off all debts, or you have started to get returns of Investment (ROI) on a steady basis that will offset any debts.
One of the highlights of the mid-term phase is the fact that you are now financially in-charge and are making important money decisions on savings, investment, and spending.
Making Some Of Your Dreams Come True
Everyone is allowed to dream big. Dreaming big plays a part in making financial plans for your future.
You want to drive a great car, live in a big house, go on vacations, see the world, eat in the best restaurants, send your children to the best schools and leave a legacy for your kids and the world.
Dreams are part of the whole process because it motivates you to work harder and be better and, in the mid-term-financial plan is where you can start making some of these dreams come through.
The great feeling you have when you see some of your dreams come through.
The feelings are indescribable because you know that everything is working according to plan.
Long-Term Financial Plans
A long-term financial plan is about your retirement.
- How much funds have you saved up?
- How much funds do you really need?
- How long should the funds carry you?
These are the three main questions to answer when talking about retirement plans.
You can calculate and make estimations about these questions by carefully going through your previous spending budgets to know what you may need to be comfortable even when inflation occurs.
You know what you spend weekly, monthly, and yearly. This information will help you to make the right projections.
When making projections, you should add 4% to inflation yearly as you make your estimations on what to save for your retirement.
In Nigeria, the government spread pension payments for about 15 years with the policies in place, and the retirement age for civil service is 65 years.
If you add 15 years to 65 years that’s about 80 years.
Assuming you decided to retire from active work at 60, you should plan to save funds that will carry you for 20 to 25 years.
However, if you have built a top brand or have invested in insurance programs that can pay you till you drop dead.
The saving plans for retirement is simple. Always add 4% to what you save every year because there must be inflation.
This 4% inflation has always survived and worked in America but if you live in Nigeria, please add 10% yearly on what you save because Nigeria’s economy is volatile.
You must plan your financial future consciously.
You must understand that the small victories, the great victories, and the no victories are all part of the plan.
As you plan your financial future, you will realize that habits are important factors to consider in determining how you can follow through effectively the financial plans that you have made.
Do not beat yourself too hard on occasions when you were unable to save or invest because of some incidents like an accident, health challenges, or some emergencies.
Remember that the funds that we save or kept are to meet these unwanted situations.
When you recover, remember to continue working on your financial plans.