Reconfiguring Your Finances

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Without solid and realistic financial planning, your finances could go out of control. Budgeting and setting financial goals can sound boring, but these activities can support you in achieving major life goals, such as buying a house, planning for retirement, and travelling. This article considers some of the major elements in a successful reconfiguration of your finances, and how you can get started with practical planning today.

Managing Major Assets and Setting Financial Goals

(i) The Family Home and Expenditure Items

The family home is often one of the largest financial commitments that many will make in their lives. It is, therefore, important that any budgeting and personal financial plan takes mortgage repayments into account. If you are saving up for a house, you could use online home loan calculators to obtain an idea of the repayments to be made and to get started with planning a realistic budget for buying a home.

Also, use your budget to identify your key expenditure items, and think about how you can cut back on these items. Here are some things to consider:

• Small expenses ? Do not discount small everyday expenses. Over time, they can become a major spending item in your life.
• Buy inbulk ? Buying in bulk can be much cheaper than buying separate units for household items.
• Utilities ? Energy, water, and gas are some of the largest household expenditure items. You could think about ways to conserve energy around the homeand cut back on water and gas usage.

(ii) Saving and Investing

Learning to spend sensibly and to save effectively is vital for personal financial success. Regardless of your current income, you should aim to save a fixed percentage of every paycheque. ?You could also do the following:

• Open a separate savings account ? Have a separate, high-interest saving account to grow your savings pool more quickly, as well as to encourage you to save more.
• Automatic deductions ? Have your savingsproportion automatically deducted from your pay each period.
• Pay cash ? Try to only pay cash for everything. This can help you spend less and save more.

If you have accumulated savings, you could think about investing some of these funds. Property, shares, and even businesses are some of the most common investment vehicles. While a high-interest savings account will help you retain the value of your savings against inflation, a sensible, conservative investment plan could allow you to grow your wealth over time.

(iii) Running Your Own Business

Many people run their own business, or have plans to do so. While business owners are required to keep personal and business finances separate, your business will have an effect on your personal income.

A successful business usually means you can withdraw more for your personal use. If you run your own business, you probably already apply comparable financial and cash flow management strategies to your business. These may include hiring equipment through business equipment leasing rather than purchasing outright, or cutting back on energy expenditure by investing in solar panels, or by using energy-conservation practices.

These types of strategies can improve business performance and allow you to withdraw more from your business for personal use.

(iv) Long-Term Plans

Sometimes, motivation is the key to achieving your financial goals. You could set out 5-year, 10-year, and 20-year financial goals. Describe these goals in as much detail as possible, and write them down. Keep your goals in mind and use them to guide your day-to-day financial decisions, as well as your short-term financial planning and budgeting.

(v) Professional Advice

Many people seek regular advice from an accountant or financial planner. These professionals can guide you through tax laws and let you know about different types of financial products that could suit your investment strategy.

Source: http://www.ccmep.org/reconfiguring-finances/

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