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Financial Planning and
the Quality of Your Plan
Effective financial planning is based largely on ones circumstances. Of the following four scenarios, which
best describes your personal situation.
- A- In Debt, living paycheck to paycheck, not able to save, with no real plan to focus on, no financial planning takes place here.
- B- Living on a simple budget plan, focused mainly on your expenses and your income, and saving a little each check.
- C- Converting your earned income into passive and portfolio income to become financially independent.
- D- You are wealthy.
Lets Take A Closer Look:
You are in debt, and you spend just as much as you earn every paycheck. In position A, you do not have any money left over to save. There are many reasons for this...the lack of a detailed budget/debt elimination plan, no set goals, or maybe a focus on the wrong plan or goals.
Eventually people become more focused on their expenses and their income. A realistic personal budget is written up. When the plan is followed (very important), you eventually become debt free.
Take a look at several Debt elimination plans here
With your debt paid off, your plan now becomes a budget/savings plan. When the plan is followed, there is a little money left over each paycheck that can be diligently saved. Consider your budget/savings plan. Is your focus to become financially independent, or to save for retirement? Look at several different plans here. If you plan on saving for retirement, continue following your plan for section B. If you plan on investing and your goal is financial independence, you should be making serious preparations for the next phase. You must be persistent here. You must be willing to invest your time and you must be willing to learn. Remember, with financial planning you get out of it what you put into it. It is all the learning and preparation that take place in this section that determine how profitable or not profitable your efforts will be in section C.
In this section your financial planning ability will be tested. If your goal is to become financially independent, you begin following an improved version of your plan... your budget/investment plan. Come this section, you have settled on a plan that involves converting your earned income into passive and portfolio income as fast as you can. Review the three cash flow patterns and realize their importance.
The minute your monthly income from passive and portfolio sources equals your monthly expenses, you should never have to work for money (earned income) ever again. The more time you invested gaining knowledge and experience, the more control you will have over your results. The more control you have, the less risk will be involved and the faster your goals will be achieved.
You are wealthy in section D. Your assets produce your income (not your job), and the income is always greater than your expenses, allowing you to re-invest the rest into other assets (which will produce more income).
It may take some money to make money, but with your assets producing all your income, it's not like you are actually WORKING for that money anymore. In fact, this is only a real issue for one person....the person working everyday for an earned income and living in a tight budget.
The Main Focus of Each Section...
A- Forming a plan to eliminate your debt
B- Building savings and preparing to invest
C- Converting earned income to passive and portfolio
D- Cash flow management and investing
If You are in Debt
Financial Planning Starts Here
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