Wednesday, April 30, 2008

Creating Your Financial Plan - Step Three

If you are still with me now you are doing great!! I hope your plan is shaping up. The next steps will be a breeze because it is a little repetition and if you are anything like me you aren’t quite this far. Your plan on these steps will not need to be as detailed until you are. However these steps are just as important. If you don’t have a plan for what to do next when you finish paying off your debt you may wind up back in debt again!!

Okay, again let’s check out our old pal Julia’s plan.

Step Three- Continue Saving
Goal- Save 3 months worth of salary.

Plan- Current Salary $3000 per month. Total needed $9000. This plan will need to be updated once debt is paid off.
Continue using the debt money- $625 per month to save toward goal.

Maintenance- Same as with step one.

Possible Completion date- approx 1 year past completion of step 2.

Short and sweet. Julia’s plan is to save 3 months worth of salary. This is a good idea for a single person. My personal goal at this point is 6 months but I am married and have children. I also have a step before this one in my plan that is to save for a vacation. As I said on day one, this is YOUR plan. Make it for you. If you are on this step now, add more details as to how you plan to get more money to save. The more you can find to save the faster you will be finished with this.

In this step, list your current monthly salary and multiply it by the number of months you choose. Maybe you want to save up 12 months and take a year off to try to start your own business. It is up to you. However, the main purpose of this step is so in the event you loose your job or have to take an extended absence to care for a sick family member you have the money to do so without going into debt. This will also act as your new emergency fund… just a really big one. If you had a major problem… say your car, washer, dryer, and refrigerator all went out at once you would be covered.

Your maintenance step would be the same as step one. If you use any of the money once it is saved you have to put it back.

Your completion date will vary but all you need to do is take your goal, divide it by the amount you can save each month then divide by 12 if you get a number over 12. That will give you the number of years. If the number is less than 12 that is the number of months it will take.

Notice Julia adds a note to update her plan once she gets to that step. Her salary will probably be higher and she will need to save more money. Don’t skip the updating step. You need for it to be an accurate amount or in the event that you did lose your job you wouldn’t have the money to cover your expenses.

When you actually get to this step you may want to add more information. Maybe you can pull money from other resources at this point. The more money you can throw at each goal the faster it is completed.

Once again, I hope you are actually using this and creating your plan. If you haven’t started yet, what are you waiting for? Keeping it in your head just adds stress to your life. Write it down and join me tomorrow for the last day of writing.

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