- Personal Finance»
- Understanding Finance
“If you fail to plan, you are planning to fail!”
I know that the word budget sounds like a four letter word so for the sake of this blog we will refer to it as a financial plan. A financial plan is simply a roadmap to how you intend to reach your fiscal goals. Everyone needs a tangible (written down) financial plan rather you are rich or poor. Without this you will never reach your monetary goals. If by some chance you do, it will be short lived.
Since money is the number one cause of divorce we can significantly reduce the probability of divorce by agreeing on the financial plan upfront. By making this a joint effort the couple can decrease the number of arguments about this subject. One person should not create the financial plan and force the other to agree to it. It should be give and take on both sides. And because it is written down no one can change the agreement without speaking with the other regarding it first.
Singles do not have a partner to hold them accountable. If you can make a plan and stick to it without anyone looking over your shoulder, then you should simply double check your actual numbers against the financial plan at the end of each month to make sure you are sticking to what you have planned. If you are not good at sticking to plans you should get a trusted friend (who is good with managing their own money) to be your accountability partner. Once a month they should review your finances to make sure you are sticking to the plan.
Traditionalist vs. Minimalist
There are two financial plans - one for Traditionalist and one for Minimalist. The Traditionalist are people who do not mind having a 9-5 job for 30-50 years. (This is most Americans.) Their financial plan is based on 100 % of their income. The Minimalist are people who are trying to achieve financial independence as soon as possible. Their financial plan is based on 30-50% of their income. The rest of their income is saved toward their nest egg.
“The poor and middle class work hard for their money. The Rich have their money work hard for them.”
—Robert Kiyosaki Rich Dad Poor Dad
Financial independence is when your investments provide you with enough income where you no longer have to work to be able to meet your financial needs. Most minorities think that this can only happen when you are 60 or older; however, you can start from nothing and achieve this in 7-10 years if you are willing to do the hard work, research and sacrifice. Instead of investing in a new car, hair or clothes minorities need to start investing in their future.
If you are willing to set your life up based on this you will be well on your way to financial independence.
1) How does you current financial plan line up with the charts in this blog? Do you need to make any changes?
2) How can you adjust your life so that you can achieve financial independence sooner?
3) Join me here tomorrow.