Tuesday, February 25, 2014

Getting your finances in ORDER pt 2

Setting a Financial Goal

Most people go through life without any guiding plans or set of goals. For the very few who do, a fewer still actually set specific plans for their finances. Although most of the goals and dreams we set out to accomplish may require some amount of funds, we almost always do not consider that fact until we are faced with financial struggles.
To experience any kind of financial success, a specific well laid out plan must be put in place. As we discussed in the previous post, a budget is always the first and best option to begin with. After drafting a budget, you need to assess your specific financial status and then aim for a higher one.
There are basically four financial statuses i will talk about today.

1. Deficit : this is when your expenses always exceed your income. In effect, you are always in debt or have to borrow to meet your financial obligations



2. Neutral or Balanced : This is when your expenses are always equal to your income. With this you are always at zero.

3. Security : This is where you have at least three to six months worth of your monthly expenses in an account you don't touch except for emergencies. With this status, you can maintain your lifestyle without having to sacrifice anything for the specific number of months you have saved as security.


4.Freedom : This where you have been able to create several multiple streams and passive income from other sources that is either equal to or more than your current income. In effect, you can decide to quit your regular job, take longer vacations and holidays or simply take time off to develop other interests without having to worry about money.


The ultimate aim of every financial plan or target is to reach Financial security but one cannot jump from 1 to 4 without passing through the other stages. Your goal is to determine where you are and aim towards getting to the next level in the shortest possible time.

Next time i will deal with how to move from deficit to neutral. Have a great day.

2 comments:

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  2. Hi Tinagyei, thanks for sharing this information. Very informative and I'm eagerly waiting for the other parts.

    I think you have a typo in your concluding paragraph though. Why isn't the ultimate goal to attain financial freedom but security?

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