Most public school systems fail us and our children greatly in a single, crucial way. They fail to teach students how to manage their finances. Most of us were never taught how to responsibly handle money, manage debt, and use credit.
As a result, 63% of Americans live paycheck to paycheck, struggling to get by each month. Fortunately, by asking ourselves “What is financial planning and how can I incorporate it into my life?” we can begin to solve this problem.
We’re here to help you get your finances back on track. Keep reading for a quick personal finance guide on how to budget, build wealth, and plan for the future.
What is Financial Planning?
First, let’s talk about financial planning. What is it?
In essence, financial planning is the act of:
- Creating monetary goals
- Monitoring your cash flow
- Managing your expenses
- Paying off debt
Personal financial planning requires discipline, sacrifice, and consistency.
How to Get Started
Now that you know the answer to “What is financial planning?” let’s talk about how you can implement it in your life. As noted above, successful financial management takes hard work. Let’s break it down into its most basic components.
Creating Financial Goals
First, you need to identify your goals. Are you trying to pay off all your debt? Maybe you want to be a millionaire by the time you retire?
Regardless, break your ultimate goal down into smaller, more manageable goals. These milestone goals will serve as stepping stones (and a blueprint) to your success.
Maximize Your Earnings
To reach your goals faster, find ways to increase how much money you bring in each month. Before you start to doubt yourself, it’s easier than you might think.
For example, you could donate blood plasma several times a month to earn hundreds of dollars. You could also start driving for Uber or DoorDash. Alternatively, consider renting out a spare room in your home.
If you feel led to do so, you might decide to choose a different career path that has a more promising outlook.
Learn How to Cut Costs
One of the best ways to build wealth is by learning how to budget. Most people in the statistic listed above live paycheck to paycheck because they have too many personal expenses, not because they make too little money.
Obviously, making more money helps, but most people grow into their incomes, feeding the paycheck-to-paycheck cycle. Instead, take an objective look at your expenses and identify where you can cut costs.
For example, you can find affordable rates to save on your auto insurance coverage, limit dining out, use only one TV/movie streaming service, learn to control online shopping habits, and more.
Eliminate Debt and Save for Your Future
Finally, what is financial planning in terms of your future?
The purpose of financial planning is to set yourself up for success. When you retire, you should be debt-free and have plenty of money in savings.
We recommend eliminating debt as soon as possible using the debt snowball method. You should also start investing in a retirement program now to build your wealth. This includes Roth IRAs, 401K plans, stocks, and bonds.
Looking for More Financial Advice?
Now that you know the answer to “What is financial planning?” and “How can I build wealth?” it’s time to start taking action. Follow the tips listed above and do some additional research for the greatest chances of success. And don’t hesitate to hire a financial planner if you’re having trouble figuring things out.
Before you go, feel free to check out some of our other articles. We have a lot more personal, financial, and career advice created for readers like you.