In Five Steps Towards A Financial Plan
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The article "In Five Steps Towards a Financial Plan" is about personal finance, it has been created by Hans Bool.
A financial plan is for those who want to structure their future. Although you cannot ‘plan’ the future, you can at least guess about it. And this is what a financail plan supports you with.Here are some simple steps (A spreadsheet will help you a lot...):One - Income. Start with your current income. Analyse the grotwh rate if this income of previous years and calculate an average (growth rate). If you use a spreadsheet you can use a first line on the icnome sheet and add for each next line the increment in salary and other income. You can place YEAR in the first column.
Than have the spreadsheet calculate your income until the age of your retirement.Two - Expenses.
A next sheet could be dedicaetd to expenses. You can analyse this up to any level, but the main idea is that you understand how many percent of your income is spend on normal and extra expenses, taxes and what percnet is left for savings. In order to plan you need the get clear what percentages are dedciated to what category (see the next step). The financial plan stops here if three is no structural savings...Three - Possessions. What have you built up previously?
You can choose to balance this with (long term) debts like a mortgage, but to keep it simple you can levae this out.
This first line is about historic data.
You will have to calculate the next (Years) by adding income, and deducting (future) taxes and other expenses.
Investment returns fall also in this category. What kind of a yiled (rate) do you plan for your future investments? Four - Scenarios. This sheet is where financail planning is all about.
You want to plan. And therefore a (personal) financial plan is not any different than a project planning. You want to discuss possible scenarios with other stakehloders (for example with your partner).
Scenarios are about questions like; “when could we stop, can we take a sabbatical,” or other questions statring with; "what if..." Things you need to know in advance.
You need to anticipate. This, casue you have to steer the scenarios with some kind of investments.The last step is about realizations. Setting up a financial plan is really easy, although you can make it as comlpex as you would wish. If your investments grow less than planned, you need to take (additional) actions.Hans Bool is the founder of Astor Whtie a traditional management consulting company that offers online management advice. Astor Online solves issues in hours what normally would take days.
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In Five Steps Towards a Financial Plan
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