Keys for a life financial plan
Key 1: – Your life financial plan goes from now until you are 100 years old
Key 2: – Determine how much you are going to save.
Key 3: – Determine your budget or your spending plan. This will indicate how much money is going out.
Key 4: – Determine the amount of money you will bring in. This includes money from working, money from investing, and money from passive income. Don’t forget to account for inflation
Key 5: – Determine your investing rate of return. If you have no investing knowledge simply invest in an index fund that matches the market.
Your financial plan has two parts, your cash flow, and your savings
Your cash flow is simply a month-to-month calculation of the money coming from key #4 minus the money going out from key #2 and key #3. The running balance is your cash at hand.
Your savings is simply a month-to-month calculation of the money coming in from key #2 and key #5. Each month calculate the interest coming in based on your investment balance multiplied by your investing rate / 12. Add the interest coming in and the amount you are adding to the prior month’s balance. The new amount is the current month’s balance.
When these are calculated out until you are 100 you will start to see the effects of exponential growth.
The earlier you start your financial plan the bigger the exponential growth