Creating a Financial Plan is an important first step in creating your own financial future. While it can be easy to get off track, a well-made plan will help you achieve your goals and make sound financial decisions. Once you have established your financial plan, it is essential to review it at least once a year and more often if you have any major life events occurring. It is also important to review your financial plan every few months and celebrate any milestones along the way.
The first step in establishing a Financial Plan is to collect all of your current assets and liabilities. This includes your home, car, cash in the bank, and money in 401(k) plans. You can also track your current debt and expenses. Then, you’ll need to determine what your net worth is. Your net worth is equal to your total assets less your total liabilities.
In addition to your current financial situation, a Financial Plan should also include a long-term growth strategy. It is important to keep your goals in mind because they may change as you grow your business. For example, a financial plan should account for any changes in your workforce and external circumstances. It will also help you determine how to invest your resources and prioritize your priorities. The financial plan is not a one-time event; you should review it periodically to update it as your business grows.
Cash flow is a key component of a Financial Plan. Understanding your cash flow will allow you to allocate more resources to savings and debt pay-down. Knowing where your money is coming from and where it is going will help you develop a financial plan that can accomplish your goals.