Kingston Financial Planning

We all have desires and goals we wish to achieve in life. Saving for retirement, your children’s education or buying a home is attainable by most of us. However, at the end of the month you may wonder where your money went and how you will ever reach your goals. Regardless of your stage in life, income, or wealth, a financial plan helps you clarify and prioritize your goals and set objectives for reaching your goals.These six simple steps will point you in the right direction.Step 1 – Track Your Household Net WorthStep 2 – Track And Manage Cash FlowsStep 3 – Establish Your GoalsStep 4 – Establish A Savings And Investment PlanStep 5 – Cover Your RisksStep 6 – Review Your Plan AnnuallyStep 1 – Track Your Household Net WorthThe net worth statement provides a picture of your financial position at a point in time. A household net worth statement will help you track your financial progress and can be used to establish a strategy to improve your goals and feel secure.Simply put, the household net worth statement is the total value of what you own less the value of what you owe. By looking at your net worth statement you will be able to determine what your assets you own (such as your home, car, or investments) and how liquid those assets are. Similarly, a review of your liabilities (or debts) will show how debt affects your net worth and whether you have sufficient insurance coverage to cover your debts and provide for your family. The net worth statement also helps you identify problem areas and take steps to correct those problems.Your net worth should increase annually. If your net worth is negative (and in your earlier years it can be negative!), then you must take steps towards debt reduction, increasing your assets, increasing your investment income and therefore your cash flow or revise your goals accordingly.Your household net worth must be calculated annually and compared to the prior year if it is to provide any value.Step 2 -Track And Manage Cash FlowsYour household net worth statement looks at a single period in time while your cash flow statement measures a period of time. The only way you can grow your household net worth is if your cash flows are positive or if you have savings. If cash outflows (i.e. your spending) exceed your inflows (income), then action must be taken to correct the situation either by increasing your cash flows in or reducing expenses.Keep in mind that I have use the term cash flow as opposed to tracking your budget. Your cash flows may not always be timed the same as your expenses. By considering cash flows, you should be in a better position to cover the unexpected costs life throws at you.Tips to improve cash flow: