Published On: Fri, Jun 16th, 2017

How to Start Planning Your Personal Finances for a Beginner

As much as it is important to have a plan for your personal finances – most people have little or no idea where to start. The good news is that it isn’t nearly as complicated as it may appear at first, and in fact even a complete beginner can start planning their personal finances with just a few basic steps:

  1. Take stock of where you stand

Before you come up with a plan, you need to know the current state of your finances. That includes all your income, debt, savings, assets, bills, expenditure, and so on. The more information you have, the better – though in some cases you may have to estimate certain areas.

photo/ Michael Jarmoluk via pixabay

2. Outline your budget

Based on your income and any expenses you may have, you can start to structure a budget. Ideally your expenses should be less than your income – but don’t worry too much if they aren’t at this stage. The important thing is to have everything laid out, so that you can see exactly how much you’re spending in relation to what you’re earning.

3. Decide on your goals

The idea behind your financial plan is to work towards a certain goal. While ultimately you’ll want to save up for your retirement, at this point you may want to focus on more immediate goals, such as paying off any debt or building up emergency savings.

4. Figure out how much you can save towards your goal

Assuming your income is more than your expenses (which is good!) –you can start saving some of it towards your goal. If it is considerably less than your expenses you may even want to work towards several goals simultaneously, i.e. use some of your income to pay off your debt, and some to build up emergency savings or put away towards your retirement.

5. Cut down on unnecessary expenses

If your expenses are more than your income, this step is extremely important – but even if not it is going to help. Essentially you should go over your budget with a fine tooth comb and see if there are any areas where you can cut down. In the event that you are paying off a sizable debt, you may want to look into the top debt consolidation firms for some outside help.

6. Review your financial plan periodically

Although you should now have the basic workings of a financial plan, you should review it periodically. Ideally any time something changes that could affect your finances you should factor it into your plan, and you should also go over your finances every month and determine whether or not your plan is working.

Make no mistake as you start to plan your personal finances you’ll slowly but surely be able to improve on your approach. That being said you now know how to make that start and however basic it may be you can rest assured that having a financial plan is always better than having no plan.

Author: Mariia Lvovych

photo by photoSteve101 via Flickr

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