I am not sure at what point after I began trying to take control of my finances that I realized I had no idea how to know if or when I would actually attain the control I was seeking. When would all the obsessive research and spreadsheets be enough that I could confidently say that I was in control of my finances?
While there is no magic formula for the perfect financial plan, I knew that whatever plan I’d follow, I would have to take into account four phases of my life: the present, the unknown, the past and the future. Below is the list I compiled of the major components of my financial plan:
(1) The Present: Make sure you spend less than you earn
- (a) Live on a budget – this means composing a monthly spending plan, including your fixed expenses, variable expenses and tzedakah
- (b) Occasionally review and attempt to reduce expenses
- (c) Increase income – this includes watching your investments (for example, your keren hishtalmut) to make sure you are getting the most out of your money.
(2) The Unknown: Plan for occasions when things do not go according to plan
- (a) Build an emergency fund – follow the advice of Dave Ramsey’s baby steps
- (b) Make sure you have the correct forms of insurance (if you are unsure what insurance you may need, see my series about insurance: Part 1: an overview of the different kinds of insurance and Part 2: how to buy insurance)
(3) The Past: Deal with your financial past
- (a) Pay off your old debts (use the debt snowball)
- (b) Change your mindset (#$@& the Joneses!)
(4) The Future: Plan and build towards your ideal future
- (a) Compose an Estate plan so you can control what happens to your money and other important assets when you die
- (b) Learn to choose and manage your Keren Pensia: If you are unsure how to go about this, please see Shomer Shekalim’s series on the Israeli pension system here.
What other items do you think are important to a financial plan?
PS – As you can see the plethora of links above, I have written on all of the subjects above except one – planning for an estate. If anyone has had any experience and would be willing to speak to me about it or write and article, please contact me at firstname.lastname@example.org.