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People constantly ask 'what's the short cut to financial success'?  Honestly there is no short cut, or rather we would say that the quickest way is financial planning discipline. I know that is unpopular, however, it is the surest way to becoming fiscally healthy. So what does personal financial planning include?  In a nutshell it involves prioritizing your goals and organizing your finances so as to meet your targets in the easiest possible manner.

Consider these four key steps.

Step No 1 - Identify Goals and Prioritize

Nothing complicated or new here.  The goals may vary from higher education, to marriage, to buying a car or a home. Once you have jotted down the list, prioritize and eliminate the avoidable ones e.g. buying a car can be delayed by a few years if you are looking forward to getting married in the near term etc.

Step No 2 - Create an Emergency Fund and Guard Against Unmanageble Risk

A very important component of financial planning is the emergency fund.  A typical emergency fund protects against the loss of a job or the loss of income due to an accident or illness.  The emergency fund should be sufficient to meet your expenses for approximately six months.  So if you spend $5000 a month, maintain a $30000 emergency fund.  Aside from this the risk of accident, disability, illness and death must be considered and providedd for.  This is a must if you are serious about providing for your family. It is important to plan for the unexpected. Most risks can be mitigated through a wide range of insurance products.  Insurance companies are willing to assume the risk you can't afford in exchange for a regularly paid premium. 

Step No 3 - Buget Finances - Manage Goal Based Funds

It is important to keep track of where your resources are going. This is done with a well structured budget.  While building your financial plan it is important to set aside and manage funds to accomplish your short and mid term goals and objectives. A goal based fund might be a) Saving $15000 in three years for a new car, b)Saving $5000 in two years for a wedding etc. Set aside funds monthly to achieve your objectives. A key approach to financial planning is to save first and spend second, rather than spending and saving if there is anything left. Most realize when they spend first, there is rarely anything left to save.

Step No 4 - Last But Not Least - Organize Your Financial House

What do we mean by this?  Now that you have developed a plan, and you know how much is available for discrecionary spending, you must exercise some discipine. The most difficult part of the plan is controlling spending.  Because there are no funds for liesure activity doen't mean liesure activity must be eliminated, you just need to get creative.  Renting a DVD is much less expensive than going to a recently released movie.

By following a few simple rules you can be on the path to financial freedom.  Once the discipline has been established we can focus on more advanced investment strategies to maximixe our financial well being.

Maintaining a log of expenses, a record of everything you spend is always a great first step to financial success. Please contact us if we can be of assistance.
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