How Do You Create A Financial Plan?
A personal financial plan provides strategies for dealing with periods of personal hardship and helps develop a prudent economic agenda for you and/or your family. Step 1 Divide your financial life into six categories: assets, liabilities, property and casualty risk (house, car, personal injury and so on), personal risk (life, health, disability and so on), education (for children, if applicable) and retirement. Step 2 Put a dollar figure to each categories. Step 3 Add up all assets, then add up all liabilities. Step 4 Subtract liabilities from assets to calculate your net worth. Step 5 Evaluate your lifestyle if the net worth is negative, and investigate ways to pay off debt. Step 6 Develop ways to build on your existing budget. If your net worth is positive, your priority will be to evaluate your lifestyle, transfer “insurable risk” (see the glossary) to insurance companies, and invest more to create more wealth.
