Four Tips about Financial Planning
Financial planning is a very broad topic. It includes things such as budgeting, debt management, retirement planning, etc. Here are four tips to help you with the basics of financial planning.
- Budgeting is a very basic component of financial planning. You need to know how much money you have coming in, how much money you have going out, and the difference between the two. Preferably, you need to have a positive cash flow. If you find that you are spending more than you make, then you need to make efforts to decrease your expenses and/or increase your income.
- Get out of debt. After you have created a budget and determined what your cash flow situation is, you need to make a plan to get out of debt. Having too much of a debt load is a financial burden, and can cause you trouble if something happens that is unexpected, such as health issues, unexpected repair bills, or divorce.
- Contribute to retirement savings. Fewer and fewer companies are offering pension plans, and Social Security is not a guaranteed option. You need to be saving for your retirement and planning for the future. You also need to take into consideration that people are living longer these days and so your money is going to have to last you longer.
- Make sure you have enough insurance coverage. Once you have created a budget, cut down on your debt, and started planning for retirement, then you will need to make sure that you have enough insurance. Not having insurance can destroy all the hard work that you’ve done in trying to get your financial affairs in order.
You need to take into consideration what your needs are as far as health insurance, life insurance, homeowners insurance, etc. Don’t be tempted to cut back on your insurance coverage simply to save a few dollars. One disaster is all it takes in order to regret that decision.
If you pay attention to these four basics of financial planning, you will find yourself with a lot less stress and with a lot more financial stability.