Financial Planning - Step 1
Where do I want to be?
This is the most important aspect of financial planning. It’s about understanding who you are (how are you with money, your family situation), what you like (spending money or saving money) and the things you want to do (have a cash reserve, buy a bigger house, retire early).
Once you have better answers to these questions you can think about planning your investments to make it happen.
Investor Profile says:
Everyone invests with some sort of goal in mind. Whether it’s to get lucky, get a higher rate of return, to save for an income in retirement, there is always a goal in mind so be sure you know what it is.
Picture yourself in 5, 10, 20 years time. What do you see there that you can start planning to afford now?
Goals can and will change over time so don’t feel like setting yourself a goal before investing means you can’t be flexible.
Establishing some goals is about asking yourself the right questions. What income do you want to live on in retirement? Do you have money you just want to invest for the long term? Do you need to leave yourself some decent spending money?
By asking yourself these questions you can start to think what the costs involved might be. Knowing how much money you want to live on in retirement will help you plan how much you need to invest now. Knowing you’re just investing for a higher returns means you can work out what to afford and the risks you want to take. Knowing you like to spend allows you to budget for this so you don’t feel guilty about doing it.
Once you have more of an idea about your goals, whether short term or long term, you can start to plan your investments around them.
Think about your goals before you invest so that you have something to aim for and measure your success by.
Read on...Step 2
