Build Wealth in a Few Simple Steps

Financial planning isn’t just for the wealthy, although most of the time it can be credited to their success. Creating a budget is only one step in deciding on a yearly financial plan.

What does financial planning even mean? Do you need a certified financial planner or advisor? Will financial planning make you a millionaire?

We’re going to discuss how to create an annual financial plan and answer the above questions. Keep reading for more information!

Financial Planning Vs. Budgeting

First, we need to define these two terms. Although they are similar in ways, they are quite different in others. The key features to financial planning include the fact that it considers long-term goals and uses strategy to build wealth.

Budgeting, on the other hand, deals with day-to-day expenses and short-term goals. Budgeting mainly looks at what you make and your expenses which will help you spend less than you make.

Setting a budget will allow you the resources for financial planning.

Learning to Create Wealth

Since financial planning deals with long-term goals, it would make sense that a solid plan would help create wealth. Becoming wealthy may not mean becoming a millionaire. It could mean living comfortably in retirement or sending your children or grandchildren to college.

Putting money into a savings account is never a bad idea. However, there are other ways to make money and expenses that should be taken into consideration. You need to think about health insurance, life insurance, and even taxes.

The idea of planning isn’t ‘saving for a rainy day.’ It is saving with a purpose, knowing where your money is going and why it’s going there. Once you know these things, setting money aside becomes much easier.

Create Your Plan

Most people in the finance world will tell you that their services are needed. It’s important to remember that they make money when you use them. Sure, they’re nice to have and you may be able to squirrel more money away, but they aren’t necessary!

Now that we’ve gotten that out of the way, it’s time to learn the basics of financial planning!

  • Set your goals- this is as important as actually saving the money. If there aren’t goals, you’ll be more likely skip a month or five of saving. These goals can be travel, early retirement, education, a health savings account, or any number of things.
  • List your assets- items like the equity in your home, vehicles, & monetary accounts
  • List liabilities- these include debt from student loans, mortgages, credit cards
  • Figure your cash flow- this is basically your budget–how much you earn and how much you spend

Now that you have the basics at you fingertips, figure out what you can cut from your budget. This could be the $200 weekly date night, designer handbags, or even streaming accounts that aren’t used often.

It’s possible that there isn’t really anything you can find in your budget to cut. If that is the case, consider picking up a small part-time job that will allow you to save the earnings. Plenty of parents make decent money by refinishing and selling old furniture, selling items through network marketing, or other odd jobs.

Since you’ve gotten a list of things you can cut from your budget, it’s time to decide where to place the extra money and the strategy involved.

Eggs in a Basket

There is some saying about not placing all eggs in one basket–it applies here. Yes, you can place all your savings into one savings account at the bank. But, they don’t offer the best return.

You could also decide to dump all of your money into a trading account. The problem with that is the fact the stock market can and does crash.

Actually, there are probably ten ways to invest your saved money. All of them have their pros and cons. The biggest thing to remember is to spread your savings around.

This is important for two of many reasons: you don’t risk losing all your money on one investment and cashing out of accounts that are less liquid makes it more difficult to withdraw money on a whim.

So, what might a good financial plan look like? This all depends on your goals. However, no matter what your goals are, diversifying where you place your ‘eggs’ will allow you to see more growth with less risk.

The Final Question:

In the beginning you may have been wondering if financial planning will make you a millionaire. You might have read this and feel like there’s no way it’s possible.

Reconsider that thought! Wealth builds wealth, and even if you don’t get to the millionaire status, you can still live quite comfortably with a proper financial plan. If nothing else, you’re teaching your children to be responsible adults which is the true mark of a great parent.

About the author:

Dave Schneider is the marketing manager at Albacross, the free B2B lead generation platform.