Your Ultimate Financial Management Tool

Have you ever built your own house or added an extension to it? If you have you wouldn't expect your builder to build without a set of house plans, even for the smallest of extensions. If he did the kitchen might get overlooked altogether or have your water supply in the lounge or day room. A plan is essential for any builder.

If a NASA rocket scientist began the construction of a new space rocket without a detailed set of design specifications how high do you think it would fly? Do you think it would get off the ground? Or do you think Congress would pull the plug on all that spending if they did it without any plans. Of course they would.

If you went to your bank wanting to borrow for a new business what would be the first thing they ask for? A business plan.

Even the most mundane activities benefit from planning. Going to work every day you have a plan of how to get there. OK the plan may be in your head but you don't go out of your drive and take whatever road takes your fancy. You'd never get to work.

Yet most of us organize our lives without so much as a thought or an inkling of an idea about our finances and without any financial planning at all. It is the only are of peoples lives where planning is thought irrelevant. How often is your month longer than your pay packet but when you try to figure out where it went you have no idea?

Not very clever of us, is it?

You need a money plan. A money plan is normally called a budget and it is crucial to have one for you to get to your desired financial goals.

Without a budget you will be financially drift without direction and end up marooned (broke) on a distant financial reef. Your dreams will remain dreams and you'll spend your life wondering "what if".

So how do you set a budget, a financial plan? Get yourself a budget planner. You can find many budget planners on the internet by typing into your favourite search engine "free budget forms".

Print one out and work on it with your family and remember, to be successful all of you will have to be happy with the final result and feel like it's something you can stick to.

First, if you have a partner or a significant other, you should make your budget together. Sit down and work out what your joint financial aims or goals are - long term, medium term and short term. Don't just throw ideas around. Work out what you really want to happen and the cost. If you want to retire at 50 what will it cost?

Then plan your route to achieve those goals. Every journey, financial or otherwise, begins with one step and the first step to attaining your financial goals is to make a realistic budget that both you and your family can live with.

Unless you are really heavily in debt and have no option a budget should never be a recipe for financial starvation. That won't work in the long term. Break it down into detailed allowances but plan reasonable allowances for food, clothing, housing, utilities and insurance etc.

Then set aside a reasonable amount for entertainment (including drinks and smokes) and the occasional luxury item. After that debt repayment and savings should always come before any further spending or saving.

Once you've worked out how much you need to live on each week or month then work out your income. Include everything you can depend on. If you get tips regularly then add them in but if it's only the occasional tip ignore it. Don't plan on an annual bonus - it might not arrive.

Work out what you have spare. Then work out how to save it. Don't put all your spare money into a pension when you have debts to pay. Pay your debts and reduce the interest costs then save where it remains accessible.

Even a small amount saved will help you to reach your long term financial goal and if you start saving a small amount early it makes life much easier later on.

Planning for the future is not difficult but to be successful can involve difficult choices. The earlier you make those choices the easier the journey.

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