Personal Financial Plan: How and Why You Should Write It
By Rimante Kudabe
out 1, 2021 out 7, 2024 • 6 min read
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By Rimante Kudabe
out 1, 2021 out 7, 2024 • 6 min read
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No matter what personal budgeting book you open or which podcast host’s ideas you find the most appealing, the absolute majority agree financial planning is an absolute necessity for anyone who wants to have control over their finances. Sure, you can just collect all the money that’s left in your wallet at the end of the week and put it away – that’s still better than not saving at all! – but having a proper financial plan to begin with will allow you not only to ensure there’s more money left over every week but also to have a much better understanding of where the rest of it actually goes.
If you’ve never written a financial plan before, getting ready to write your first one might seem tricky. Where do you start? What should the plan involve, and how should you make sure you follow it? Don’t worry: a financial plan isn’t an official document that has an exact structure and must-include points. It’s much more like personal guidelines – and in this article, the team of your favorite passive income app Honeygain will explain how you can make them work in your favor.
A financial plan includes detailed information about your income (salary, investments, passive income, scholarships, gifts, etc.), expenses (rent, transportation, groceries, entertainment, attire, health, etc.), and financial goals. Basically, it is a breakdown of how much money you receive and how you manage it to make sure it suits your needs and wishes.
Not at all! The thing is, everybody has finances – and whether they’re rich or poor, everybody has their own daily challenges. By shaping the financial plan around your personal capabilities, needs, wants, and goals, you can gain a lot more control over your money and get closer to the objectives you have set for yourself and your family, be it buying a house in the Bahamas or finally paying off your student debts.
Of course, a lot of rich people do make financial planning one of their priorities – simply because there’s a lot they need to plan: next to high income, they usually also have a ton of financial commitments and operate a lot more financial instruments than your average Joe. However, a financial plan is easy to adapt to anyone’s situation: even if you don’t need to manage a massive portfolio of investments and bonds, you might want to, let’s say, keep an eye on your spending so you could put more money away for a down payment of your dream home.
Honestly, this is extremely individual. Think about:
When starting your financial plan, begin with what’s set in stone, i.e., what will certainly not change. List the income you will surely get (don’t speculate on whether your mom will give you $20 for your birthday instead of buying yet another pair of socks!) and the expense you will definitely not avoid (e.g., rent or phone bill). This will allow you to see the real financial situation you’re dealing with and not miss any important payments before the deadline passes!
Next, think about your financial goals. Once you’ve got those in check, you can estimate how much money you might need to put away every week or month to be able to achieve it in time. Some experts use the SMART formula to remind their clients how a good goal should look like:
Let’s say you want to save up for a summer trip that costs $500. It is a precise goal (S) that has a set financial value (M). Think of how much time you’ve got left and split the cost between the weeks or months: if you can set aside this much money on a regular basis, it’s a realistic goal (A). Since it will boost your spirits after a long school year, it’s undoubtedly relevant (R), and the date your vacation starts at is a clear deadline (T) – which means you’ve got a SMART goal on your hands!
To help you get a better idea, here are a few examples of how a badly shaped financial goal looks like:
Following the simple and easy-to-memorize SMART formula, you can shape short-term or long-term goals and stay motivated in working towards them!
If you’re in a serious relationship or have a family, you might find it easier to take up financial planning for the entire family. After all, you probably have:
Writing and following a financial plan together might start a lot of meaningful discussions in the family – which can be a great opportunity to identify your priorities, recognize areas of unnecessary spending, and even teach your kids to manage their finances smartly from a young age.
Here are a few tips to help your family succeed in financial planning:
Statistics say that almost 2 in every 5 US households could not come up with an amount as low as $400 in case of an emergency. This is alarming: even if no actual emergencies happen, always being one bad day away from bankruptcy puts a massive amount of stress on the entire family and harms both your mental and physical health. Consciously managing your money and regularly putting some of it away for savings relieves you of worrying about the future and helps you achieve your financial goals without imposing very strict regulations on yourself or your family.
If you wish you could save more money every month – why not look into passive income ideas? While it’s true that some of them do require you to invest quite a bit of time or effort, you can also find ways to make money nearly effortlessly with apps like Honeygain. All you need to do is run the app on your Windows, macOS, Linux, Android, or iOS device while it’s connected to the internet: the app will share your extra bandwidth with a crowdsourced web intelligence network and generate your passive income based on your shared traffic.
No, you won’t make millions of dollars or enough to cover your monthly costs with Honeygain – and yet, it’s basically free money you’ll receive for doing nothing. Isn’t any extra amount welcome when you’re into saving money? Join now by clicking the button below, and enjoy a starting gift of $2 straight away!