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I was asked during the last 2 months by friends a horde of questions with regards to finance.
- Should i start investing now?
- What should I invest in?
- Do you have an agent that can recommend to buy insurance?
- Which sector is good to invest in?
No doubt the investment fever has really caught on with many. However, I see it as a natural progression that after having quite abit of fun with life after starting out work, its time to think about investing for their future.
My advice is first to recommend that they get their financial house in order, before thinking about all these plan. Some doesn’t want to miss out on the fun in the stock market, while others feels awkward when one doesn’t have any form of insurance.I would prefer that they think about budgeting before they start planning for such things.
I decide to instead be proactive and write about the way I plan my money. To me, its not just about getting right advise about budgeting and money management. What is important is also about setting up your infrastructure to plan, monitor and evaluate.
Many focus too much about the plan and evaluate, without touching on how to monitor. We are seeing alot of good opensource tools that we can use to help us achieve this, and here I will show you how its done.
Before you can think about investing or buying insurance, you need to think about funding for these 2 items in the long run. Lets just say that buying a whole life policy is not a 1 year 2 year affair. You will be paying for almost 20 years to probably when you are 65 years old (And it can get even longer then that!)
To grasp you can commit long term cash to such items, you will need to have a strategic budgeting plan for your family or your combined disposable income.
Where does budgeting go into your overall plan? In my opinion, it should be done after you setup your Financial Mission Statement and Defining your Goals. When your goals are defined, you
- can then find out if your spending within your means at the moment
- find out how much you can spend to fund your goals
- whether you have existing debts that you will need to clear before some goals can be achieve
Do note that budgeting, like the rest of the items in your financial plan, is something that you need to monitor and change when the need comes. It takes commitment and discipline.
Once you have effectively set out your budget, you can then consider your other immediate needs, namely insurance and investments.