“If you fail to plan, you plan to fail”. Having said that, you can’t really create a financial plan for 2021 if you don’t know where you want to go. So, as with any journey you want to take, you need set a destination.
Side note:
I am not a financial planner or advisor – I am simply sharing my experience and thoughts based on what I’ve seen in my own life in changing my own financial habits.
Clearly define your planned destination
Let’s compare the process of achieving your financial goals to a journey from where you are to your destination. This journey’s destination is defined as the place where your financial goals have been reached.
But first, like with any trip (financial journey in this case) you take, you HAVE TO KNOW YOUR DESTINATION. In other words: you have to have a clear picture in your mind on where it is you want to end up before you start the journey.
In you mind and emotions, you should how it feels to reach this destination. You should know the smells and sounds of that destination. This will enable you to withstand distractions and also to keep you motivated to change the proverbial flat tyre along the route.
ONLY AFTER YOU KNOW YOUR DESTINATION for 2021 and beyond, can you create a financial plan (or route for the journey) which you can use to reach that destination.
Another side note: For those who are weary of setting up goals or plan in fear of not achieving them, realise that every step you take toward your goals is a step closer and even though you might not achieve them in the time you wanted, you WILL GROW!
Assess your current situation
The first step in any journey (or in creating a plan) is to assess where you are – determine your starting financial circumstances. Creating a FINANCIAL PLAN FOR 2021 is no different.
After you’ve done that, you need to determine what vehicle (or vehicles) you need to use – that brings us to setting the first goal.
GOAL 1 – Financial Independence
You need to have long term, mid term and short term goals in you FINANCIAL PLAN FOR 2021. Financial Independence is a long term goal since it will take some time to achieve it.
You may not achieve it in one year – depending on your starting position, which we covered earlier. Financial Independence is achieved by having more than one income stream.
If you are looking for some tips or ideas for creating extra income streams, you might enjoy this blog post: Extra Income Ideas for full time emplooyees
Number 1 income (Primary Income) as an employee or business operator/owner
- Solidify or advance this income by investing in yourself – become better at what you do, but also start preparing yourself so you can be ready to take the next step when the time comes or opportunity presents itself.
- Identify, train and educate other people to take over your role or responsibilities – ie you need to free yourself up in order to be able to take the next step
- Start creating at least one other income stream – check out this video for some ideas:
GOAL 2 – Financial Freedom
In achieving this goal you will consistently spend less than you earn. For more details about why this is important, you may be interested in reading this blog post: Spend less than you earn
Pay off debt completely (except for your home if you own one), the freedom of being in full control of where you spend your income is amazing!
Start saving to invest and grow you other income streams, or start ANOTHER income stream with the surplus cashflow you have been able to establish
Save up 3 – 6 months’ expenses in an emergency fund – this money should not be touched for anything else than emergencies
GOAL 3 – Take Control of you Finances
START A BUDGET and work toward a budget that supports your financial plan for 2021! I recommend aiming to achieving the following structure:
- Less than 25% on housing
- Less than 10% on transport
- At least 10% savings for retirement
- Not more than 10 – 15% for other living expenses (you want to try and spend only 50% of your income on living expenses, but for now, let’s work on 60% for the above at this point in time)
- 30% of all income should be used for saving and snowballing you debt
- The last 10% of your income should be given to some worhty cause so it can impact someone else’s life – and you should not seek to gain anything from this! You have been blessed with the income you have, and you should give some of it away in gratitude for what you have!
- Part of you savings should go toward starting an emergency fund.
The short term goal is to CONSISTENTLY telling your money where to go, or else it will just flow away like water that gets pored out on the ground.
Make it personal
I hope this blog post gave you some tips, pointers and ideas of how to personalize your own financial plan for 2021. That is why I did not want to go into specific details – you need to make it personal to make it as real for you as possible.
If you’re interested in watching some videos on YouTube regarding this and other related topics, please visit my channel: Weide-Market on YouTube
May you have an amazingly blessed, healthy Christmas season and may 2021 be your year in which you start building a healthy, wealthy, juicy life.
