Planning your financial future requires that you start
building a secure foundation under your financial house today. When
developing a plan, several areas must be addressed. Some of these areas
include funding a child's college education, investing for a secure
retirement or purchasing a second home. However, many individuals begin
planning and investing for their future before they have a clear
idea of their present situation.
One of the best ways to begin building for the future is
to create a monthly budget. Your monthly budget is the first step in
designing your overall investment strategy. A comprehensive budget gives
you an excellent idea where your money is going. Without it, huge amounts
of money may disappear. Many people think they don't make enough money to
begin and maintain a budget. However, when these individuals calculate the
amount of money they may earn over their working lifetime, they learn they
will earn a tremendous amount of money. For example, an individual making
$25,000 per year will earn $1,000,000 over a 40 year career.
Retirement Income Calculator
to determine how much money may pass your way in your working lifetime.
Here is the formula for your use, too:
Now that you know an enormous amount of money will pass
your way, doesn't it make sense for you to create a budget that will allow
you to keep and invest as much of it as possible? Below are the six steps
in creating a household budget.
SET FINANCIAL GOALS (STEP 1)
goals is the first step in creating a budget. Have you heard the old
saying, "If you don't know where you want to go, you won't know how
to get there"? By setting financial goals you will have a road map to
USE MONTHLY TRANSACTION RECORD SHEETS (STEP 2)
monthly transaction record sheet (MTRS) is similar to a diary. The purpose
of a MTRS is to teach you how and where you spend money each month. Write
down the date, the description and the amount of every transaction for
three months. This includes mortgage/rent payments, food, gasoline, etc.
After each transaction, indicate if you paid cash, wrote a check or used a
credit card. By recording all of your transactions for three months, you
will begin to uncover trends in your spending habits. For example, upon
examination of your MTRS, you may learn you spend a large percentage of
your income eating out at restaurants.
to learn about an comprehensive book that has help
thousands of people build a solid foundation under their financial future.
This comprehensive book contains sample budgets and forms for you use.
USE MONTHLY CASH FLOW STATEMENTS (STEP 3)
have recorded three months spending history, compile the information into
a cash flow statement. This will show you where your money is coming from
(cash inflow) and where it is going out to (cash outflow).
CREATE A MONTHLY BUDGET ALLOCATION (STEP 4)
next step is to create a monthly budget allocation. The purpose of a
budget allocation is to capture any amount of money currently slipping
through your fingers. Just because you are redirecting portions of your
current income into an investment plan, it doesn't mean you and your
family should not enjoy the present. You'll soon find, as many others
have, that creating a budget allocation actually creates additional
USE AN ANNUAL NET WORTH STATEMENT TO MONITOR YOUR GOALS
Annual net worth statements are an excellent way to monitor
your financial progress. Your net worth is your total assets less your
total liabilities. When calculating your net worth use the current fair
market value of your assets and the current outstanding balance of your
liabilities. If your outstanding credit card balances are a large amount
of your net worth, you have two options.
The first is to follow my Debt Reduction Strategy.
Go To Debt Reduction Pyramid
The second is to consider using a professional debt
assistance service. A comprehensive debt assistance program will lower
your monthly payments, lower your interest rate on outstanding debt and
will save you money.
CREATE A REWARD SYSTEM (STEP 6)
Create a reward
system. Planning for your financial future is supposed to be a fun
process. Make it so. For example, after you and your family have reached
your annual goal, enjoy a night out on the town. This helps your budgeting
process to be a combination of hard work and fun. Good luck with your
Well, I hope
that this web article has been informative. If nothing else, I hope you
are now aware that you can achieve your financial dreams using simple and
little know money strategies. For years you have been taught that only
financial experts can guide you through the “Money Maze”. Now you know
But, there is a
great deal you still don’t know. The article you’ve just read is
really only a primer to your designing the lifestyle you deserve.
to Survive the Retirement Crisis of the 21st Century”
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about building a solid foundation under the lifestyle you’ve always
If you are
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