Having a plan in place for most things in life, whether it is personal or business-related, can ensure that there is structure to your goals. Whether you aim to retire early or see your business idea grow, you’ll want to map out the financial development journey. To help, here are some of the key elements you’ll need to consider and help make a sound financial plan.
Set Realistic Goals
All plans start with a foundation to build on, so you need clear goals to track and monitor finance development. Setting these at the beginning is recommended, and they need to be realistic and clearly defined, rather than a general goal such as owning a successful business. If you set goals that are too general or unobtainable, you may find yourself losing track and feeling unmotivated. Setting shorter goals that are realistic, such as earning £X amount by a certain date, you have something more grounded to work towards. This is true from both a personal and business POV, as you may want to reduce debt by a certain amount, or have a savings goal by the end of the year, for example. If you are looking to borrow money, such as from a personal loan or payday loans direct lender, you’ll want to set goals on how quickly you want to repay them and how this will impact your other financial goals.
Forecast Performance
Being able to forecast your earning is a key component of finance development, as it means you can work out your expected earnings. For your personal finances, this should be straightforward if you have a salary that is more or less the same each month. You would also need to factor in any other income streams, such as from a second job. For business owners, forecasting is all about predicting how much sales revenue you are expecting throughout the year. This can be tricky because it will depend on other factors such as seasonality, especially if you notice trends in sales at certain times of the year. The better you are at forecasting how much you look to earn, the easier it will be to plan expenses.
Plan for Essential Expenses
We all have essential outgoings we need to maintain, so to do so, you need to keep track of them. If, like many, you have multiple financial commitments that all leave your accounts at different dates, keeping track is vital. For business owners, you will need to plan for essential expenses that are both one-off and ongoing. You may have office rental space that is the same cost each month, for example, but you’ll need to factor in those expenses that are not so frequent, like equipment costs, office furniture, expenses for one-off events, etc. Everything needs to be covered, as if you miss out on any expenses and pay for something you can’t afford, it can have a huge impact on your cash flow and future plans.
Project Cash Flow
Knowing your future cash flow is another key area of finance development. The further ahead you can project, the more you can plan and avoid falling into difficulty. Predicting the future is hard, but understanding when cash flow may fluctuate or decrease or increase for your business is essential. If you know you have busier months than others, you can predict what cash you have left that can go towards future projects or investments. In terms of personal finance, if you are a freelancer or self-employed, you can work out when invoices are expected and factor this into your essential outgoings.
Whatever your future plans are, tracking your finance development will help you stay focused on the task ahead and achieve your personal and business goals.