What Not to Do when Planning Your Finances

What Not to Do when Planning Your Finances

Planning your finances, means that you are looking at how best to manage your money. Most people think this is drawing up a budget. However, it also involves working out your investment strategy, if you need a loan, what you’re saving for and how much. And then the next part is living out what you’ve planned.

It's good practice to plan to have review sessions of your finances at regular intervals. Seeing how your financial plan is working out, helps take the underlying, sometimes ever-present, anxiety away of not being quite sure. And knowing you’ve scheduled a look through; means you are more likely to do it.

5 Financial Planning Considerations

While you know where you are going, there are some common pitfalls that you want to avoid. These are five important areas to remember when you are planning your finances. And with them some Dos and Don’ts of Financial planning.

1. Financial Reality

It doesn’t help to go through the process of planning your finances if upfront you’re not brutally honest with yourself. You set yourself up to fail if you start off by padding your budget or under-representing what you actually earn. Someone might say to you that it works well for them to round things up or down. Avoid doing this. It may be a little bit here and there, but it adds up and can change your bottom line a lot.

2. Emergency Fund

Not having one, or not having a big enough buffer, is a mistake. Especially if you are able to put aside money for that inevitable rainy day. You may only be able to put aside a little bit every month. Remember, little bits add up overtime. And when you need it, any amount is going to help you. Additionally, it’s a good habit to start off as early on as you can. As your income grows, you’ll be less tempted to wait-until-next-month to start your emergency fund. And more likely to increase how much you put aside as you earn more.

3. Goals: Saving and Investing

Regardless of how much you earn, already have saved or invested, you need to set yourself money goals. People who don’t plan what they want and need to do with their money, fail in their money management. Money is, for most, a limited resource. Therefore, you need to plan by making a list of what you need and want. Then, plan your savings so that you can work towards getting them. Planning to invest for the future is also a good idea. How much will you need to retire and when do you aim to retire by? What size nest egg do you want to ideally have?

4. Loans and Borrowing

Not factoring in how much the cost of having a loan or borrowing money is, is a mistake. It’s almost a sure way to create a situation where debt becomes out of control. Ahead of taking out a loan, look at the different types of loans. You may find that a traditional personal loan or a business loan from a bank isn’t the best answer to your financial needs. Gold backed cash loans use Gold & Gold Jewellery as collateral. This often results in a better interest rate and less overall risk should you not be able to pay an instalment. Another alternative is to sell your Gold & Gold Jewellery. It can give you immediate access to money without the need to budget for instalment payments.

5. Monitor and Review

You need to keep an eye on things. Not doing this puts you at risk of bad credit ratings or being blacklisted. Essentially, if you don’t know what’s going on, you can’t make a change when you need to. Ideally you should review your budget on a monthly basis. Your overall financial plan should be visited annually. It’s helpful to time it when you have a salary adjustment. At regular intervals you also need to monitor your investments and money market type accounts. This will ensure that your money is indeed growing. If not, you’ll know that you need to change your investment strategy and where your money is.