Putting It All Together
Now what?
Okay, we've gone through the basics of financial planning:
- setting financial goals
- calculating your net worth
- determining your cash flow
- preparing your spending plan
What's next? Well, by this time, you probably have realized you have a long way to go to meet all your financial goals. That's why we went through the exercise of prioritizing them, because for most of us, the way to achieve them is accomplish them one goal at a time.
So, start with the most immediate goal. Knowing how much cash goes in and out, find out how how you can fund that goal. Good for you if you have enough. Better yet if you can finance more than one goal at the same time.
However, if you're running a tight ship at the moment, then you have to look at several choices. Ask yourself how will you be able to achieve each of your financial goals.
Just like a business, there are various ways you should consider:
1. increase your income find a higher-paying job
- get yourself promoted
- moonlight or freelance
- get into networking
- buy a franchise
- put up a small business
2. decrease your expenses live within your means
- cut unnecessary expenses
- be a smarter buyer
3. increase your assets
- increase your portfolio income by buying paper assets
- invest in real estate for rental income
4. decrease your liabilities pay off your credit card debt
- accelerate your loan payments
- refinance your mortgage
- extend the term of your loan
As you can see, there are so many things you can do, and many of them at the same time. Of course, some are easier said than done. My suggestion: start with what's easier to do, such as cutting unnecessary expenses or paying off your credit cards, thus freeing up cash for financing your goals.
In fact, even before you think about investing, look at what you can cut. In the same way companies do cost-cutting first before thinking of investing, expanding, or adding their sources of revenues, do your own cost-cutting measures first.
You'll be amazed how much cash is actually available just by taking small steps. Because a little goes a long, long way. And that's our topic for next week -- Principle #3: A little goes a long, long way.
