When you decide you want to get serious about making some real money, getting on top of your credit cards, mortgage or other debts it’s time to sit down and crunch some numbers. Establish your current financial position and decide where you want to go and how you will get there, by answering some questions, and following these 8 simple steps to developing your own financial plan.

One. Work Out your Financial Position and Needs

How much do you want to invest? What is your income after expenses, will you borrow to invest? How much? What sort of return do you want or need? Do you want to invest short or long term? What will your future expenses be? How is your health? How much do you have in superannuation? How much super are you likely to have when you retire? Will this be enough?

Two. Write Down your Financial Goals

Are you investing for income now or do you want to build assets you can draw on in the future? When would you like to reach your goals? Consider a step by step approach, 1 year, 5 years, 10 years. What sort of lifestyle do you want now and in the future?

Three. Write down your preferred strategy to achieve your goals

Will you purchase property, shares or both? Will you manage your investments yourself, use a financial planner or managed fund? Will you use long or short term strategies? Will you reinvest your returns?

Four. How do you manage your income?

What do you need to live on, how much can you afford to save? Can you put money aside for an emergency? Are you in secure employment or self employed?

Five. Project your future earnings through income and investments; include these in your plan.

Will your salary rise? What is your estimated investment return, how will it be used? Will you draw on your returns regularly, for large purchases or investments?

Six. Consider the possible risks; include yourself (eg. ill health, loss of income) and how you will deal with these?

What investment risks are you prepared or inclined to take? Have you insured yourself? What insurance do you need? Have you made out a will? If you have assets dying without one could make things very difficult for your family. Do you have someone who can step in and act on your behalf if something happens to you? Take care to keep accurate, orderly and up to date records of your investments.What investment category do you fall into conservative, moderate or aggressive? Do you have a need to sleep peacefully at night or are you inclined to gamble?

Seven. Include all Expenses

What expenses will you incur if you use a financial planner or managed fund? What costs are involved if you use a stock broker or trading platform? What about property purchases and their ongoing fees? Will you allocate time &/or money towards self education.

Eight. Get Some Expert Advice before You Proceed

So you’ve outlined a plan and answered some really tough questions. Congratulations! You’re off to a great start. There are a number of avenues you can now consider to ensure the success of your plan, so before you proceed consider some professional advice. You may decide to talk to an accountant, a financial planner or stock broker, read books or undertake some study. So be informed as much as you can be and create for yourself and your family a financially secure future.

By: Teresa Vidal