Today, we're going to help you get your financial plan set up.
Financial planning isn't just for the wealthy.
It is for everyone.
It's actually what helps you become wealthy.
Financial planning is an ongoing process
that will help you reduce your stress around money.
It will help you support your needs
and help you reach your financial goals like becoming financially free.
I am Tiffany Thomas with Wealthy Tiffany
dot com and I achieved financial freedom at age 38.
And if you are looking to achieve financial freedom at a young age as well,
hit that like button and hit the subscribe button and we are going to dive right in.
There are eight steps to the financial
planning process that we are going to cover today.
The first step is to set goals.
You'll want to set specific goals with a time frame included.
For example, where do you want to be in five years?
Do you want to be living in your dream
house and be taking an international vacation every year?
Or do you want to be running your own business?
Where do you want to be in five years? What about in ten years? Does that include
having a family, being a stay at home mom or having a career? Does it include
a yacht or a mansion somewhere? What is it that you want to achieve?
I know for me, one of my financial goals was to achieve financial freedom by age
40, and I ended up achieving that by age 38, even two years earlier.
So I set this specific goal to become
financially free, and then I worked backward.
What was it going to take to get me there?
I would need to invest my money, make it work for me so I could have
passive income or at least semi passive income coming in so that I wouldn't have
to worry about money or I wouldn't have to work a nine to five job.
And of course, that would be my choice.
I could still work a nine to five if I
wanted to, but I didn't have to do that because of money.
And you can also look at the shorter term goals.
Maybe you just want to pay off some debt or you want to have an emergency fund or
you want to save up for a down payment on a house.
Think of different goals and write them down.
Be very specific about what they are and when you want to achieve them.
And that way you can create your financial plan around your goals.
The second step is to figure out your net worth.
This will help you figure out where you
are currently with your finances and then help you make improvements along the way.
In order to do that,
you need to figure out how much all of your assets are worth.
That would be your home, your car, anything you have in your savings,
or your checking, your 401K, any financial accounts that you might
have, and then anything that is worth something that you could sell for money.
And in this regard, assets aren't just items that are working for you.
They are just anything you own that is worth value.
And you can do this in a Google sheet.
You can make a list of all of these items
and then put the value next to them, and then you're going to figure out how
much you owe and this would be all of your liabilities if you have a car loan,
for example, or your mortgage, or if you have any credit card,
debt or student loans, or even if you are in debt to a friend or
a family member, any amount that you owe to someone else.
You'll want to make a list of these items
and put the amount next to them, and then you'll total up all of your
assets, and then you will minus all of your liabilities.
And that is your net worth.
And I want you to remember that your net worth is not the value of who you are.
It's showing you exactly where you are
with your finances so you can make improvements.
Once you've figured out what your net
worth is, then you can make improvements along the way and work toward your
financial goals and toward becoming financially free.
And if you are curious to know exactly how
much you will need to become financially free, I created a video for you.
I will leave a link above and below.
You can check that out later on. Comment below,
I know my net worth, if you know your net worth or if you are about to figure it
out. The third step to your financial plan is to start tracking your money.
You want to know how much is coming in and how much is going out.
So you'll want to set up a list of all
of your expenses and all of your income and see where you are financially.
Do you have positive cash flow or are you spending more money than you are making?
And one thing I like to use to track my finances is a free app.
It is called personal capital.
You can link all of your financial accounts to personal capital.
So your checking, your savings,
your 401K, your credit cards, your mortgage, all of it.
You can see it all in just one place
in about 30 seconds. And it's just an app on your phone you can open and see,
okay, yeah, this payment was made. Or,
oh, I forgot to make this payment and I have a fee now that I have to pay.
Or you can see, oh, maybe my savings isn't as high as I would like it to be.
Where can I start cutting back?
Or maybe I went out to eat too much this month and I can do better next month.
There's just all of those little details about your finances that you can analyze
very quickly when you can see them all together.
If you are interested in using personal
capital, I will leave my referral link below.
And if you hook one of your retirement
accounts to Personal Capital, you can get a free $20 Amazon gift card.
Now that we have a clearer picture what
our net worth is, and we are tracking our money,
so we know how much is coming in and how much is going out.
Where we are spending our money.
Now we can move to step four and start to make adjustments.
We can start matching our spending to our
priorities so that we can reach our financial goals.
Take a look at all of those expenses that you have and really start to just
analyze them and think, oh, is that something that's really important
to me? Do I really want to be going out to eat as much? Or do I want to put more
money toward my financial freedom fund? Oh, have I even watched Netflix or
Amazon Prime? Maybe I don't need those accounts anymore.
You can really start to focus on the things that are important to you.
Instead of just going with the flow
and doing the things that are important to your friends or family.
You can really make adjustments when you can see a clear picture of your finances.
For me, one of my goals was to buy another property, so I really started to focus
on that goal, and I wasn't spending so much on clothing,
and I would put that money that I would have been spending on clothing,
toward buying another house, toward a down payment on a property.
One of your priorities might be to travel.
I know I really enjoy traveling.
I recently went to Glacier National Park
and was able to just take a fun trip with some friends and be out in nature,
do something, and that's what I really enjoy.
And I'm able to do that because I spend according to my priorities.
And of course, your priorities will change over time.
So don't forget to make adjustments for that.
Maybe you really liked watching cable, and now you never really watch it.
So get rid of the cable subscription.
Think about where you want to be in five years or ten years and what's going to get
you there. Is going out to eat every day, going to help you get closer to your
goals, or is it going to take you further away?
And that's not to say you can never go out to eat again.
It's just focusing on your priorities.
There are some sacrifices that you'll need
to make now that you won't have to make later.
Step five in the financial planning
process for beginners is to protect yourself.
You want to make sure that you have adequate insurance.
This could be health insurance, car insurance or home insurance or even
life insurance, but you want to make sure that you feel comfortable with where you
are spending your money to protect yourself and if you haven't reviewed these
things in a while, then it's probably time. You could probably get a better rate
on your car insurance or even on your home insurance.
So take a look at the different insurance
coverage that you have and call around and see if you can get better rates
and maybe your life has changed or your lifestyle has changed.
So you may want to change the coverage
that you're getting. And to go along with the health insurance,
if you have a high deductible insurance
plan that is HSA qualified, health savings account, qualified and you haven't set up
an HSA, I would highly recommend doing that. It is a great investment tool.
And not only that, it helps with your medical expenses.
So if you are interested in setting up
an HSA, I created a video for you about that.
I will leave a link above and below in the description.
You can check that one out later
on and moving to step number six in financial planning.
We want to reduce our taxes as much as possible.
Taxes can be one of the highest expenses
that we pay, so we want to make sure and lower that as much as possible.
There are a few different ways to reduce your taxes.
One of them could be to start your own business.
You can have a lot of write off on your taxes
when you have your own business.
You can make sure you are itemizing instead of taking the standard deduction,
if that is better for your situation. You can even set up an IRA to help reduce
your taxes, an individual retirement accounts.
And if you want more ideas on how
to reduce your taxes, I have a video for you.
I'll leave a link above and below. Moving
right along to step number seven, which is to invest your money.
And you can even create an investing policy to make this easier.
But you definitely want to invest your money.
You don't just want to save your money.
And I'm speaking from personal experience here.
I was huge into saving and not so much
into investing, and I've made that switch over
to investing. And I wish I would have done it sooner, but nonetheless,
I have done it and I can tell you how important it is to to have as much of your
money working for you as possible as soon as possible.
It makes such a big difference.
You can start very small and very simply.
I have a lot of videos about investing on my channel so you can check those out.
But to just give you a few examples,
you definitely want to be getting a match a 401K match from your employer.
If that is something they offer. And that can be part of your investing
policy, you can say I always contribute at least the match to my 401K.
You could also set up a Roth IRA.
I like using Vanguard. And you can say that you contribute
the maximum, which is currently $6,000 a year to your Roth.
You can also set up a brokerage account.
Which means that you can take that money out at any point without any penalty.
And yes, you will pay taxes.
So you want to hold that investment
for at least a year so that you pay long term capital gains tax.
But that's just another option for you to invest your money because there is no
cap on how much you can put in a brokerage account.
And then as far as what goes inside
of your investments, you can just say I invest in a total stock
market fund and keep it super simple so that you will actually do it.
And I personally like investing in real estate.
So you could add that to your investment portfolio as well if you would like to.
I just buy and hold the properties
and collect cash flow every month from those properties.
So figure out what you want to be investing in.
Create a simple investing policy and invest your money.
Comment below and tell me if you are
already investing your money and what your favorite investment is.
And the last step,
step number eight for financial planning is to have a will or a trust set up.
It makes it a lot easier to figure out which assets you have and who they should
go to if you have a will or a trust set up.
And even if you don't have a ton of assets
right now, it's still good to have that just in case something were to happen.
And I have heard of a website you could use to set up a free will or trust.
It's called Tomorrow dot me and I haven't
personally used it yet, but I thought I would just give you
an option that you could check out. And while you're working on setting up
your will or your trust, in the meantime, make sure that you have beneficiaries
listed on all of your financial accounts so that at least someone will get
that money in the event that something were to happen to you.
I have heard of a lot of family drama
that happens when someone passes away, especially when there is no will or no
trust, and they have to figure things out on their own.
So let's not have that happen and take care of it beforehand.
All right.
If you found those eight steps to setting up your financial plan helpful,
please hit that like button and share this with someone else who wants to hear about
financial planning and hit the subscribe button to subscribe to my YouTube channel,
and hit the little Bell to get notified on when I post new videos.
Thanks so much for watching.
I'll see you in the next video.