Taking stock of your situation will help you know what plans to take

PERSONAL FINANCE

SYLVIA JUUKO...don’t wait for a rainy day to buy an umbrella

PLANNING for the future is not a financial habit that comes easy to a good number of people. Because of the many competing needs, it’s reasonable to take care of the present and hope that the future will work itself out. This is also compounded by the lack of a culture of planning for the long-term.

But just like a solid business plan is key to a successful enterprise, making financial planning a habit will set you on the path to achieve financial freedom. We all know that we cannot predict the future with certainty, but it will make a big difference if we prepare for it.

The challenges that were brought forth by the effects of the global downturn should be an indicator that we have to be better prepared to cushion ourselves from the volatile environment that we are faced with today.

If you have not made financial planning a habit, the best course of action is to have foresight regarding where you want to be from a one -five year’s time (short term) as well as 10-years and beyond (long-term).
If you already have a financial plan in place, now would be a good time to review it to match your goals to the changing situation.

But if financial planning is still alien to you, then you need to activate a robust plan. A plan is like a blueprint that will facilitate the achievement of your life and personal goals. For starters, you need to evaluate your current financial situation and then try and match it to your needs with the available finances.

Once you have taken stock of your situation, you are in a position to know what it will take to implement the plans and what kind of resources you are working with. For example if you are highly indebted, then a debt repayment plan should be a key component of your plan.

We are all at different stages in life so your plan should take into account your station in life, employment or income sources and the level of responsibilities you are currently shouldering.

The next thing to consider is the level of resources available for your financial plan to work. Experts counsel that all our goals can be quantified in monetary terms. Once you have clearly laid out your goals you can estimate what it will take to implement them.

You should start with managing the resources you already have. Your habits will determine what kind of lifestyle you live and the amounts needed to sustain it. If you tone down on the level of extravagance and cut out the waste, then you can be able to set some money aside for saving which will eventually be invested.

Savings vehicles could either take the form of specialised bank accounts, through co-operatives or any other means that suit you. There are a number of financial instruments to choose from, take off some time to acquaint your self with how they function.

Depending on how ambitious you are in your plans, it may require you to look towards accumulating more income streams to bolster your resources.
With long-term planning you can determine whether you are accumulating enough wealth from your primary sources of income to enable you cater for more than your lifestyle needs.

If you register success on accumulating passive income, then you should be confident that financial freedom is within reach.
If financial planning appears complicated, you can seek services of experts for advice. The internet has several software resources that can enable you effectively shape your financial plan.
As your financial plan takes shape, you should remember to carry out reviews annually to cater for the changes in your life stages as well as investment opportunities and your risk profile.

For example, you could have made a plan at the time of your first job, but a year later, you may have children in the picture. This means that your priorities have changed and you need to plan for more expenses that come with a growing family.

Alternatively, you may have accumulated more income streams during the year, which will require a revision of your plan.

You have to shed the belief that you only need to plan when you get to some level of income. The smart thing to do is to plan for what you have and build on what you need to do to get to the next level.

Achieving financial freedom shouldn’t be restricted to the level of salary or income you get but on how efficiently you use what you have and the kind of lifestyle you lead.

With a solid financial plan, you can be able to use your income to accumulate assets that can generate passive income. But this requires an unusual form of financial discipline to pull off.