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23 May 2019


The logical step, following the previous post on financial independence is drawing a basic financial plan. Wouldn't you agree? We are unpacking ways to reach financial freedom. It is as much a journey for me as it is for my readers. I am also investigating the best ways to improve on how I handle my finances, how I save, how I invest, how I diversify and balance my portfolio, how I build various streams of income and how I  plan to eventually retire comfortably.

basic financial plan
Let us look at the very basics of financial planning and set some milestones together. Like both our Facebook and Instagram pages to follow my progress whilst you work on your own plan. I am right now growing my medium term savings.
Oh well, let us dive right into our exercise by firstly taking stock of where we are.

1. My Assets (What I own):
The beginning is how our finances look at the point of this review. We start with what we own. There are broadly 4 asset classes that we will use for this exercise. We are not going to break the assets down to sub categories. Check the examples in the third column below to get an idea.

Asset Class Asset Description Examples
Cash Cash is generally short-term and low-risk in nature. My shortest term account is the one day notice account. Money market, notice accounts, savings, etc
Bonds Savings bonds is money one lends to government or an institution that needs to raise funds. This is also low risk. Government or company issued bonds.
Real Estate Property investment for holding, leasing and/ or flipping. This is obviously my weakness. Residential, commercial and real estate investment trusts (REITs).
Shares, Stocks or Equities Company shares in the stock exchange or even offshore. This is easier than most people imagine. Individual stocks and/ or exchange traded funds (ETFs).

2. Debt (What I owe):
The next step in drawing a basic financial plan is listing liabilities or what we owe. This has to be the most scary step. No stress though, a problem identified is as good as conquered. 
  • Homeloans or Mortgages are more longer term debts that we have. Get the exact amounts owed to banks and add them up;
  • Short to long term loans;
  • Car loans;
  • Credit cards and other revolving debt like retail store accounts;
  • Any other debt.

3. Net Worth (What I am worth):
This is where we add up all our assets and subtract our liabilities (debt) to get an idea of how much we are worth. Not to be fazed though, a negative net worth can still be rectified. 

4. Setting Financial Goals
Now that we have an idea of how much we are worth, let's go ahead and set our finance goals. How far do we want to grow our net worth? Are we looking at developing passive income, diversifying our portfolio for more streams of income, invest for a comfortable retirement? What to we want to achieve? What is our basic financial plan?

5. The Plan and Strategy
  • My main focus has always been on paying myself first. This involves saving before spending, growing funds for various purposes like emergencies, saving for larger purchases like cars, etc.
  • Drawing and sticking to a monthly spending plan or budget. It's not that hard really.
  • Paying consumer debt off, including credit cards, retail cards, cars, mortgages, etc.
  • Reviewing the essential policies like life insurance. This is a need when one has dependents.
  • Reviewing funds for retirement, including the retirement annuity. Learn how to maximize the RA.
  • Growing savings for children's education.
  • Growing the investments for a balanced portfolio. Are you happy with your stocks, bonds, savings, real estate investments, etc.
Please share your own personal finance strategies in the comment below, on Facebook or Instagram.


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