Spending without a plan is like ‘driving blind’.
Is your intention to continue living between pay cheques, or to create a lifestyle that gives you financial freedom?
A financial plan is a blueprint for your financial decisions, to ensure that the future of your finance is secure.
Here are a few tips on how you can create your financial blueprint:
Create Multiple Income Streams
Do you have a skill that you can turn into additional income? Why not take that opportunity to offer a service or product that you can earn from? The traditional 9-5 income can become a strain as the average employee may struggle to use one income to cover their daily needs. In addition, as jobs no longer remain ‘secure’, it reinforces the importance of having additional revenue to cover such an unfortunate event. If entrepreneurship is not your cup of tea, consider diversifying your investment portfolio to include instruments which pay dividends or coupons. Consider including, for example, common stock AT&T Inc. [NYSE: T] which has a quarterly dividend yield of 6.49% or Citi Group Inc bond which pays a 6.3% coupon semi-annually. Rental income can also be used to generate revenue. Owning a home is an unrealised revenue until the property is sold, so if you have an in-demand location and a few free rooms, you can turn your space into passive income and even make it apart of your retirement planning.
Though we can never be fully prepared for an emergency, purchasing insurance policies can significantly reduce your exposure to financial losses. Policies can be purchased to protect you from property damage, business interruption, health scares and even provide for your family in the event you pass away.
Practice Comparative Shopping
Purchasing the latest gadget or trying to keep up with the newest fashion trend can run you into significant financial trouble. The next time you have an urge to make a purchase, consider taking the time to compare the prices. E-commerce now makes it easy to differentiate the offerings of different retailers and identify ways to capitalise on bargains. You can still be trendy without the high cost.
Spending without a plan is almost always costly. Set a budget, realistic goals and hold yourself accountable to your financial decisions. Always check your bank accounts regularly and be prepared to adjust your financial plans to include life changes such as the birth of a child or a career change.
Automate Saving & Investing
If you find it challenging to save or invest, make it easier by setting up a salary deduction or standing order to have an amount automatically deducted from your income, that way you won’t have easy access to the funds to make bad spending decisions.
- Are you getting a bonus this holiday?
- Do you expect to get a salary raise?
Consider ignoring the new funds by putting it toward investing or increasing your savings.
Formulate a plan, and make deliberate choices to shape your financial decisions. If you fail to plan for your financial future, the outcome will be failure.
Take that first step today to create a financial plan, and stop relying on your finances to survive on auto-pilot!
Creating your financial freedom is easier than you think!