An abundant life doesn’t happen in an instant. It doesn’t necessarily require luck or fate, all it needs are good planning and careful, persistent, and determined efforts. Financial planning is very important in achieving a very abundant life. In fact, it is the very key in achieving financial security and keeping yourself from struggling financially later on in life or whenever you’ll need money the most. It doesn’t matter how much you’re earning today, what matters is how much can you keep and how can you make money work at your advantage and maximize its potential.
Financial planning is made up of several steps. It is a process that must be undergone and if done well, it will result to a very financially well off and abundant life. However, it doesn’t happen overnight. One thing that you must keep in mind in building your financial foundation and striving to achieve the great things in life is that they take time. You may cut the trip shorter by improving your knowledge and developing some discipline but rest assured that it won’t happen so quick, in a matter of days that is, So what are the things that must be considered in making a financial plan that will lead to abundance? Read on and find out.
1.) Increase your cash flow. Increasing your cash flow doesn’t necessarily mean increasing your income but it may work that way. Increasing your cash flow means that you must increase the amount of cash that you have in your hand when the need arises. You can also do this by minimizing expenses. However, more sources of income may mean more cash flow if your expenses are low and minimized. Discipline yourself in terms of finances because in order to build a very strong financial foundation, you’ll really need a lot of money. In order to get some, you’ve got to give some.
2.) Healthcare. Nothing is more important in starting your financial foundation than establishing a very good healthcare base. The reason why healthcare is given a priority is because nobody lives in this world who doesn’t get sick. Getting sick is very costly and is one of the most common reasons of bankruptcies and financial strains. Getting yourself a healthcare can save you from a lot of financial trouble once you or your loved ones get sick,
3.) Insurance/protection. Ironically, most people dread the word insurance. For them, they think that insurance is just an additional expense. They failed to realize the benefits that insurance brings. Insurance serve as an income replacement or protection. It is very important for breadwinners to have an insurance because it will provide their loved ones a good financial support once their income generating capacity is gone either through death or disability. Term insurance is ideal over life insurance because you may not need an insurance for the rest of your life. If you have established a good financial foundation, you may no longer need an insurance.
4.) Debt elimination/management. Debt, probably next to sickness, is one of the biggest causes of financial strains. Debt creates a life of its own if it isn’t being managed well and settled. If you have an existing debt, make sure to settle it quick to avoid interest charges or you can make debt work in your favor. There are two types of debt, the good debt and the bad debt. A good debt is a debt that brings more money to your pocket while a bad debt pulls money out from your pocket. Ideally, the rate of return of good debts must be higher than the debt’s interest rate. Learn how to manage your debt well and make it work in your favor. Many people were able to make a lot of fortune through debts.
5.) Savings. Now that you have a healthcare, insurance, and have either eliminated or managed your debt, its time to fast pace your savings. Several financial planners suggest that you must have a savings that is at least 10 times of your annual income. Why at least 10 years? Because if you lose your income source for the next years, you can still live. However, it is a very ideal scenario because you can never predict how much money do you really need in the next 10 years. Ten years is actually a very long time already so before that time expires, for sure you can already find a new source of income. A savings worth 10 years of your annual income is a very huge amount already and in reality, may support you for at least 4 to 6 years.
6.) Investments. Investments come in last because investments are intended for long term, they grow and will require a lot of time. Most people make the mistake of jumping immediately to investments without getting healthcare and insurance and even not minding their debt and start saving. They think that investing is saving. Investments are financial tools for long term goals such as education plan for you children or your retirement plan. A long term vehicle must not be used for short term goals thus never use investments for emergencies. You have a lot of sources already if you followed and built your financial foundation the right way,
7.) Protecting your estate. Protecting your estate means protecting your investments. Since investments take some time to grow, you’ll never know what may happen. At this stage, you may require financial experts to help you out or while building your financial foundation, you can gradually learn on how to do this, at least you can save a few thousand bucks of professional fees by doing it yourself.
Following these steps requires time, discipline, and effort, but it’s all going to be worth it in the end. The pain and sacrifice that you’ll be doing in establishing a strong financial foundation will be rewarded tenfold if you reach the top. Money is going to work for you and you’ll no longer need to work for money. That is called financial security and independence and financial security and independence brings abundance.