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Step 1 - Setting Goals
Step 2 - Collecting Facts and
Figures
Step 3 - Assessment of
Financial Health
Step 4 - Realistic Goals
Step 5 - Action Plan
Step 6 - Review and
Assessment
Action Plan
This step of the money management process involves working out your
implementation strategies. How are you going to manage your money to reach
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Developing and understanding a concrete spending plan is essential to this
step. When your cash flow is in the positive, what do you do with that
extra money at the end of every month?
Once the preparatory work of analyzing, determining and calculating is
complete, the most important step of money management is implementing your
strategy to ensure that your financial goals are reached. This is the step
where many people find it useful to consult with a financial advisor or
bank to get advice on the many investment possibilities that exist. These
people can help you understand the value of establishing a
well diversified portfolio that will help you meet your goals by spreading
risk, reducing volatility and enhancing the potential for solid long term
returns. Regardless of your unique goals, a well-balanced portfolio, based
on your individual investor profile, is the most important requirement of
any financial plan.
All money managers agree on one thing. The sooner that you can begin to
implement a savings and investment strategy, the better. It doesn't matter
how large the savings or investments are, what matters is how early you can
begin to implement it. Many follow a particular dictum, that in it's
various ways, speaks to 'smaller and consistent investment over less
frequent, larger investment'. What we see as small now can, over the years,
grow into very significant savings.
Issues that will come up during this step include:
1) What degree of risk are you willing to take in an investment strategy?
2) How much money you will need at retirement.
3) The expected costs of a child's education.
4) Acceptable and desired amounts of life insurance.
5) The role of company or personal pensions.
6) Your debt comfort level.
7) Are you comfortable with the stock market?
8) When investing, are there certain values you feel are important, for
example, environmentally friendly ("green") investing?
If you are unfamiliar with investing and savings vehicles, it is often
highly recommended that you visit a professional financial planner or
other qualified finance expert. Finance and investing are very complex,
dynamic topics, and there are not that many of us who are capable of
sorting through the many options and choices available on our own.
Be honest with yourself. If you need help to develop an implementation
strategy, do not be afraid or embarrassed to ask for help.
Jump to Step 6 -
Review and Assessment
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