Planning Your Financial Future
Step 1 Get Organized
"Aside from completing a Financial Plan or the occasional loan application where we're forced to disclose everything ... people don't fully realize what they OWN or OWE money on."
In this introductory video, Jay Horn will walk you through the steps of creating a Personal Balance Sheet, where you will be able to visualize your overall wealth and recognize the factors that consistently diminish that wealth.
Step 2 Follow the Money
“We either control our finances or our finances control us.”
Now that you've gotten yourself set up, it's time to track your money - how much you spend, save or give away on a monthly basis. This practice will help you determine the funds that are available to be placed into savings or investments. Follow along to learn how to monitor what you spend and save monthly.
Step 3 Create a Plan
“When your vision is clear, your decisions are easy.”
In this step, you'll learn to recognize and list both your immediate and long-term financial goals. Jay encourages creating an emergency fund equivalent to three months of expenses so that you're prepared for any surprises life throws your way. It’s a short-term effort for a long-term gain.
Step 4.1 Begin Saving
You have reached the final stages of your journey to financial literacy! The Step 4 videos will help you to determine your current financial position and what you still need to accomplish for a successful financial future.
"A few cutbacks now will provide stronger stability later."
You will need to set aside three months' worth of expenses from your "needs" category to create an emergency savings fund. During this time, you will be paying the minimum on all debts and cutting back on unnecessary expenses. Once you have built up your emergency savings fund, you will then move on to either Begin Debt Paydown, if you still have outstanding debts, or Begin Investing, if you are now debt-free.
Step 4.2 Begin Debt Paydown
“By tackling our debt, we’re removing burden from our lives and helping ourselves refocus energy and attention to other areas.”
If you are still paying off debts, then you will Begin Debt Paydown, which is the process of creating a new savings plan with the end goal of becoming debt-free. Using the Debt Paydown chart you will reallocate the money that you have been setting aside for your savings and placing it toward debts that need to be paid off.
Step 4.3 Begin Investing
“This is a good time to reflect back to our financial goals to remind ourselves what else we want to achieve.”
Once you Begin Investing there are a few things to keep in mind:
- Don’t invest in something you don’t understand.
- As a beginner, stick to the basics like diversified mutual funds and ETFs.
- Invest for the long haul with long-term objectives in mind.
Jay urges that instead of working for instant gratification, you should invest in something that will reach a higher value over time.
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