Financial Freedom - Prepare Your Personal Financial Statement
It seems most of the work to be done in the journey to financial freedom is at the planning stage. When everything is set in place, what remains is to action the plan, and keep at it through thick and thin.
You need to prepare your Personal Financial Statement and Financial Freedom Plan.
What has Financial Statements got to do with me? I am not a corporate body. I used to think so.
If you want to achieve financial freedom, you have to acquire financial literacy. You have to be familiar with those terms and ratios, and how they affect your life. Those numbers tell stories. If you are not familiar with the numbers, you may not be able to measure your progress in the journey to financial freedom.
It is virtually impossible to take full control of your finances without written personal financial statements. We all do have personal financial statements. The problem is, they are in bits and pieces stored in the brain. Put together mentally, the do not make a coherent whole. Most of the information is lost, as the brain does not hold that type of information for long. We do not realize this because we have not attempted to put it together on paper.
Le's do a quick test. Can you give figures for the last six months of the following items: your total income, housekeeping, bank balance, debt, gifts, entertainment etc?
You must be superhuman if you can accurately reproduce the figures from your head. You simply have to itemize all your expenditure. Ideally we are supposed to itemize every item of expenditure. I tried it, but lost steam after three months. Now I collate the totals. Writing it down shows you graphically where your money goes... It enables you to know where to apply the knife if you need to. If you do not write it down, you will be wondering every month where the money went. You may even imagine there is a mysterious black hole in your bank account! (maybe some extraterrestrials come in with UFOs to zap your money to Mars!... )
Forefront of the Hottest Battle
The record of your expenses is required in the Financial Statements and plans you will prepare; Personal Income and Expenditure Statement, Balance sheet and Financial Plan (Aka Financial Freedom Plan) etc. Without this record, you cannot prepare a realistic financial plan.
Gathering this data is a whole lot of work. It is what I chose to call ?the forefront the hottest battle?. It seems to be an unlikely theatre, but this is where most people give up the fight, and with it, their quest for financial freedom.
It may sound like an overstatement. It is about control. Without these documents, you are clueless as to your financial state present past and future. You cannot control what you do not know. You can make as much money as you want, but power without control is a recipe for disaster?
Personal Financial Freedom Plan
This is a snapshot of your independence day. When, how... This is the place you saw in your mind, when you were still in the rat race. It says when you are planning to exit the rate and states your key financial indices (income, expenditure, savings and investment, net worth, financial ratios etc).
It lays out your plans, how to achieve it, which route you want to take (career, self employed, business owner), which business you are going to go into, your modus operandi, business plan etc.
Simply put, it is downloading your mind unto paper, and backing it with a business plan (more on business plans later).