If there is one regret I have in life it is that I did not do any finance planning from the first paycheck that I received. We only have about 30 productive years and in order to have a great quality of life when we grow older, it is important for us to plan for retirement as early as possible. The longer you have your investments the larger the fund amount; that is the magic of compound interest. There are five steps to successful financial planning for early retirement
First of all, you need to check your financial status and honestly assess where you stand currently. Are you in debt? How much in savings do you have? At the rate, you are going how much will you have saved and invested by the time you want to retire? Do you need to increase your income or monitor your spending? Knowing your financial status allows you to plan and set goals for your financial future. Some people fear to check their financial status hence they have no idea how much debt they have, what is in their bank account or how much they have amassed in their retirement funds. Do future you a favor by facing your fears and knowing your current financial status so that you can formulate a plan that will take care of you when you are old.
Finance Planning Goals
Once you know where you are you can set goals for where you want to be. For example, how much debt do you have and when do you want to pay it off by? Set goals according to the SMART principle, put them in writing and start working towards achieving them. In order to formulate effective goals, you can use advise from Personal Financial Management books like Rich Dad Poor Dad by Robert Kiyosaki and I Can Make you Rich by Ramit Sethi.
Finance Planning Plan Development
For each goal come up with action steps that you can take towards fulfilling it. All areas of personal finance should be covered in the action plan; that is maximizing income, minimizing spending, proper savings and investments as well as protection of capital.
Execution Of The Financial Plan
You now have your goals and action plan in writing, so the next step is to take immediate action on the easiest step and continue acting until you complete all the action steps. Sometimes your goals may seem daunting and unachievable however your task is just to take the next logical step. For example, if your goal is to increase your earnings to $5000 a month and you currently earn $2000 the first step would be to establish how you can get a raise at work or identify what side hustle you can start to earn more money.
Finance Planning Monitoring And Reassessment
Once you act it is important to assess your results and see whether you are moving towards your goals or away from them. Actions that are not working should be replaced with better suggestions. It is also important to reassess your goals at least annually because as we grow our desires also evolve.