21-Apr

Financial Plan – How to Create

Put simply, a Financial Plan is a document (or collection of documents) that prepares you financially for the future. This can be as simple as a household budget, or as complex as legal documents, wills, pensions and investments. There are companies that offer financial planning services, but you may not need this help. Often, basic financial plans can be easily created at home. When creating your financial plan, follow these 5 steps:

1. Think Long Term and Short Term

A good financial plan takes into account your long term and short term goals. A short term goal might be paying off a small debt. Such as a payday loan or store card, whilst a slightly longer goal might be paying off a larger loan or credit card. Goals don’t need to be all about paying things off, so you should think about everything that’s related to your financial state. Do you want to plan for a baby, move house or go on holiday? These are all things to consider.

2. Consider Your Current Situation

Goals are great, but you need to know where you’re starting from. Write down a list of all your current assets including property, savings and investments. Then write another list of all your debts and liabilities. You can use this to gain insight into your current financial position, to see just how far you are from the goals that you’ve listed.

3. Come Up With a Financial Plan

Once you’ve listed your goals and discovered how far you are from them, it’s time to connect the two. You need plans for how you’re going to meet your goals, and there might be many different routes to consider. If you’re planning to go on holiday, write ideas such as ‘sell old belongings’ and ‘work 10 hours of overtime’. If your goal is a bigger one, plans might include asking for a salary increase. Or downsizing the house. Maybe even selling your car or moving your savings to a different and more rewarding location.

4. Pay off Debt first

If you do have debt, it usually makes sense to pay this off before focusing too much on your savings. What you’re paying out on loan and credit card interest rates could be higher than what you could earn back by putting your money into a savings fund. Additionally, your debt could have an emotional impact that affects other areas of your life. Try to arrange your financial plan so any debts, from payday loans, credit cards, all the way to longer-term loans, are paid off as as a priority. If you still have outstanding cash loans for bad credit, you are best to clear them off sooner than later.

5. Review Regularly

By constantly checking your financial plan, you might find motivation in the fact that you’re getting closer to your goals. Or, if your plan isn’t working, you’ll be able to recognize this and to make adjustments before things get out of control. Adjustments might even include lowering the amount that you put into savings. Especially If it’s an unrealistic figure. One that’s causing you to struggle elsewhere.

Don’t forget you can make personal financial plans and joint ones with family members. Check if your goals for the future align and collaborate on the routes that you want to take to reach them.

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*Disclaimer & Example: For our Small Loans of $2,000 or less, an APR (Annual Percentage Rate) doesn't apply. These loans are fee-based only with a term between 62 and 180 days, and so the APR is 0%. The establishment fee is 20% of the amount borrowed and the monthly fee is 4% of the amount borrowed. Representative example: a loan of $1,000 repaid over 3 months equates to a total amount payable of $1,320 comprised of $1,000 principal (amount borrowed), $200 establishment fee and $120 in monthly fees. The maximum comparison rate on loans between $300 and $2000 is 199.43%.
For our Medium Loans between $2,100 and $5,000, with a term between 2 months and 12 months, the maximum Annual Percentage Rate (APR) is 48% (Comparison rate 65.6597% p.a.) and there is a $400 Establishment Fee. A Medium Loan of $3,000 borrowed over 1 year would equate to a total amount payable of $4,289 (including a $400 establishment fee).

Under the current legislation, most small personal loan providers don’t charge an annual interest rate (you’ll know this as an APR %). The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. The maximum comparison rate on loans between $300 and $2000 is 199.43%. This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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