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How To Create A Financial Plan

How To Create A Financial Plan

These are rough financial times for everyone – people are having a hard time maintaining their finances and they are living from paycheck to paycheck. The first years of marriage are fun and comfortable – that is true – but that is just a game you are playing as one big happy family. “Nothing else matters as long as we are all together” is a sentence you have heard in dozens of movies, but life has taught us all that money doesn’t fall from the sky and that miracles rarely happen.

The process of achieving financial stability is slow and it implies a lot of sacrifices, but it will be your shelter when the financial storm comes. It is never too early to start planning for the future. Creating a financial plan can and will help you overcome some of the biggest financial moves in your life – such as buying a house or a car, college payments for your children, etc. Here are a few steps which will help you form and harvest the full benefits of a financial plan.

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Review your budget!

First of all, you need to assess your monthly income and expenses that burden your monthly budget. Water, electricity, heating, and phone bills are always a top priority. Evaluate your expenses and try to find a loophole – where you can save some money, whilst avoiding debts. Reason your expenses.

Open a separate savings account

By tightening your budget, you will end up with a certain amount of spare money at the end of each month. Instead of just throwing it away on some random pleasures in life, put it in your savings account. Even if they seem small and meaningless at that point, they are a vital part of your future savings. Restrict yourself from using that account except for emergencies only!

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Set measurable goals

Saving money for “just in case” is a bad thing. You need to set measurable goals for your savings. For example, saving for a car as a concept will be far less motivational than saving for a “Mini Cooper”. Always keep your mind on what are you saving for. This way, you will know when you have reached your goal and when to start saving for something else.

Motivation is important

Although long term saving is rewarding at the end, you will have to restrain yourself from some simple pleasures in life. This often results in lack of motivation and most people often give up. That is why you need to keep motivating yourself for successful saving. For example, whenever you reach a milestone (like six months of saving), reward yourself with something small and meaningful, like a family night-out – a movie or a dinner.

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Reconsider hiring a financial planner

If you are finding it hard to plan for yourself, you can always consider hiring a financial planner. You might find it difficult to calculate your budget on a monthly basis. That is why you can always consult an experienced accountant that will help you estimate your budget and point you in the right direction –the one which can save you money. Keep in mind that although financial planners are charging for their services, they can help you significantly when it comes to controlling your budget and optimizing your monthly savings.
As we mentioned, saving for the future is a hard and slow process but it’s highly rewarding at the end.

The sooner you start saving, the less you will have to fear for your future. A good savings account will provide you financial stability, not only in rough financial times but for significant financial emergencies as well.

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More by this author

Ivan Dimitrijevic

Ivan is the CEO and founder of a digital marketing company. He has years of experiences in team management, entrepreneurship and productivity.

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Last Updated on March 4, 2019

How to Use Credit Cards While Staying Out of Debt

How to Use Credit Cards While Staying Out of Debt

Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

Do Not Treat Credit Cards as Your Funding Sources

Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

Make Sure to Always Pay Off Balances in Full Each Month

The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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Using Credit Cards with Rewards

Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

Featured photo credit: Artem Bali via unsplash.com

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