Personal Financial Planning Lesson 5 - Freedom

What does freedom means to you? Financial freedom may mean no more liabilities. It may also mean paying off your mortgage and for some parents, it may mean no more financial woes with regards to “feeding” their children. Financial freedom is a goal which I believe everyone will long for. If desire for it, you should put that dream into your personal financial plan. The plan is there to help us achieve freedom whatever we define it.

Trust me, no matter what financial freedom means to you, it will come true, but not without setting goals and formulating a plan to achieve them.

freedom thumb Personal Financial Planning Lesson 5 Freedom

Priorities

Our financial plans should be created such a way that it clearly states our priorities in life. These priorities are important to us because we should use them and reference to them, whenever we want to make any financial decisions. With these priorities in place, it will be harder for us to make stupid financial mistakes.

 

Time and Capital

To begin our journey, it is necessary we examine our resources before we set off. The 2 most important resources that I would like to mention here is our time and our initial capital. The more time we have to start out with, the smaller the capital is required from us; the less time we have, the larger the initial capital is required from us for reaching our goals.

 

Risk

Another factor that we might consider is the level of risk we are willing to take with our money. We often hear people say that, “Low risk low returns and high risk high returns.” It is somewhat true in the sense that if you willing to consider taking more risk with your investment, you may reduce the time required for you to achieve the financial goal because of the higher rate of returns. Of course when there are more risks, there will be less certainty and in extreme circumstances, you may lose all of your money.

 

A financial plan not only states our financial goals, it should include the strategies (saving, investing, or most likely a combination of both) that we will be using to achieve our goals. I have also briefly talked about setting priorities, the time and capital required, plus the risk we are willing to take to achieve our goals. We can set short or mid-term goals so that it is easier for us to track and measure our progress. When these goals are accomplish, we can then create new ones to point us towards financial freedom.

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Last 5 posts by Rendell

January 12, 2009 · Filed Under Personal Finance

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