Planning your life financially will help you much more than you think, financial planning means getting better quality of life, having more possibilities to do what you want and ultimately achieving good financial freedom.
In this post I will teach you in 10 steps for you to make good financial planning and put your finances on track.
Control your spending and use technology
The first step in making your personal financial planning is to know your current financial situation. How to do this?
It is essential to record your debts, income and expenses. You can do this using notebooks, spreadsheets, or applications, whichever is simpler and easier. It is important that all your expenses are recorded, preferably at the time they are made.
We have some app tips for you to use, here are the 7 best spend control apps. There are apps that plug right into your account and do most of the hard work.
You can also make use of some spreadsheets, we have ready templates that will help you a lot:
It is possible for you to spend a reasonable amount of time listing your debts, sources of income and expenses, this process is very important as it will give you insight into what you do with your money.
2. Create goals for yourself and your family.
Now that you have a vision of what you are spending, how much you owe, and how much you earn, it is time for you to get motivation to continue your journey.
The best way to do this is to set some goals. To do this it is important to divide your financial goals into two categories:
- Short-term goals are those you can accomplish over a 1-year period, such as vacationing or buying a new phone.
- Long term goals, are those over 1 year, you want to add $ 100,000 in 2 years;
That way you will know what financial goals are needed to reach your goals. After 1 month of spending control and following the following tips you will be able to make very realistic goal planning.
Don’t forget to involve your family within this stage, it is very important that you understand the reasons for tightening financial control.
3. Financial Education
Financial planning is something that must be done daily and always improved. That is why it is important to always acquire more knowledge on the subject.
Books, movies, articles are valid content for you to improve more and more.
We’ve made some lists of books that can help you a lot on this journey, starting with the first recommendation from the following post:
3. Know how to invest
Investing is putting your money to work for you, how to do it?
The first step for you to be able to invest is to know your investor profile. To help you out we have done a short quiz (5 minutes) that will help you define how you will do it.
Now that you know your profile, it’s time to see what your investment possibilities are, we’ve made a very simple tutorial to get you started:
Always remember the power of compound interest, they can turn small investments into good sources of income for your future.
4. Rule 50-15-35
You have the all-expense spreadsheet, you know how to invest, and you’ve started reading about personal finance. What is missing? Understand how to allocate your money.
There is a rule for you to apply in your day to day financial work as follows.
50% of your earnings / income should be spent on items such as condominium, water, electricity and other basic things.
35% are intended for leisure and activities such as walks, short trips, gym and courses. It may not seem like it, but these activities directly affect your productivity, it is generally never good to cut them off.
15% should be used to pay off debt and after repayment this amount should be used for investments.
It is a very simple rule, but with it you can regulate your spending.
5. Use your credit card!
Many financial managers do not advise using a credit card, but if it is well used it will be a great weapon in your financial repertoire.
Before using your credit card make sure that the store allows you to buy at a discounted price, if not and if the installment does not generate interest, then the best thing to do is to install and get this money to invest.
Some cards give you advantages when buying tickets and other items, see if you use all these advantages and if they compensate for the annuity of your card. Try giving preference to non-annuity cards, such as Banco Inter.
Planning is a daily task, and ideally you should always remember these tips and apply them daily. Also, refer this content to someone else, if your family members or friends have the same mindset, it will be much easier to have good financial control.
6. Live below your financial condition
Another big mistake made by most financial aid portals is telling their readers to live up to their financial condition.
Is it always good to live on less than you need and try to save a little more, the reasons for that? Well, if you have a drop in your income you will already be used to living below what you can earn.
In addition it will be possible to create a larger mattress or have the possibility to risk much more in your goals. Remember to follow the 50-15-35 rule and if possible increase the value of your investments.
At this point you need to know how to differentiate your wants from your needs, what you want is different from what you need. I always wonder – “Do I really need this device?”
But always prioritize your diet, health, clothing, housing and food.
7. Know How To Get Rid Of Debts
Getting rid of your debts is not easy and most people do not know a good way to do this. There are actually two, one of them is the avalanche and the other the snowball.
Mathematically the best way to get rid of debt is by using the avalanche method. It consists of paying off your most expensive debts first, those that generate the most interest and financial weight, such debts usually tend to be higher.
While this is the best method mathematically, it is not what works the most. The snowball method does just the opposite, you start paying off the smallest debts in full and then going to the big ones.
The snowball method has a much higher success rate, this is because we are adapted to have a short-term vision and get quick rewards which helps to have more motivation to continue paying off debt.
Once you choose the method you start calling your creditors, negotiating is extremely important. Don’t be afraid to pull the price down.
8. Redo the process and improve
Perhaps the most important thing is consistency, no use controlling your spending in one month and forgetting these tips completely in the next.
Reassess your goals, expenses, debt, and income monthly. Consistency is power, maintain consistency in your investments and planning if other methods are difficult to look for.
Last Tip – Start Increasing Your Revenue Sources
You may have noticed that some of your goals are not within your reach with your income, but don’t be sad.
Plan with your current income, but always look for new ways to receive passive income. Passive income is making your assets or assets work for you.
There are several ways to increase your income and maintain your long term working level, I explain how to do this with traditional investments and cryptocurrencies in the post below:
Conclusion, a summary of what you should do
Start by listing your expenses, this can take up to 1 month depending on your financial health. Test apps, spreadsheets, see what’s easier and simpler for you to do this registration. Be patient.
Once you see your financial reality it is now important not to get discouraged. To do this create achievable goals, short and long term goals.
Now it’s time to start learning about the subject, movies and articles are extremely important, but reading a few books on the subject is critical.
You can not waste time as you learn about it and make your records, do not leave your money stopped. No, don’t use savings, start putting money in the CDB with daily liquidity (see investment post for more details).
Start allocating your income according to rule 50-15-35, the sooner the better. Oh, don’t forget to use your credit card, but use it wisely! Live on less than you have and need.
Having an insight into your financial life, it’s time to start negotiating your debts, do it as soon as possible! But do not forget that you are a human being and not a machine, choose the method that most pleases you to pay your debts.
The last and perhaps most important step is to spread your knowledge, teach your family members what you have learned, send your friends some tips, and point out quality content.