Budgeting advice for Street Smarts
Setting goals will always impact financial planning positively. In fact, I believe that starting a successful financial plan is impossible without setting goals.
Setting goals is the key to make every plan in life successful. Financial plan is no different. In a financial plan you have to decide where you will allocate your money. There are many different options for you to use. Stocks, bonds, savings account, GICs are some common options.
What you ultimately decide to allocate your money to will depend on your financial goals. If your goal is to save for retirement, then you must set a goal for a specific amount that you want to save for retirement. This way you will know how much you need to save every month, and what type of account to use.
A savings account will give you less interest, but the money will be available anytime you need it. Bonds and GICs are long-term investments, and pay higher interest than a savings account. So, if you don't know where you want to go financially then you won't know where to allocate your money. Saving money and putting it in your piggy bank is the worst way to grow financially.
With goals you would get a direction. Your financial planner [if you have one] will also get a direction to help you with. The way you approach your goals in the financial plan will depend on your goals. Do you need money in the short-run to buy a car? Or do you need money to save for a house ten years in the future.
Depending on your situation, your financial plan can either be an aggressive or a passive plan. Aggressive plan will include investing in the stock market, and businesses where you can expect the return on investment to be higher.
Passive financial plan will involve a lot of saving and budgeting. If you need money in the long-run, then this is the way to go. It is secure and a steady way to grow your wealth. You can also choose to invest in high-security investments like bonds and GICs.
But, all this depends on your goals. Many people create a financial plan to build their wealth. But, how far do you want to go? Do you want to make millions of dollars or billions? These are very important questions. If you don't answer these questions, you might never be satisfied with your financial plan.
So, set a goal before you even think of financial planning! Set deadlines and write down the specific amount of money that you need by the deadline. With more specific goals, you will be able to make the perfect financial plan for yourself.