One of the greatest liberators in life is financial freedom. But to get there, you need a plan. We offer a few easy steps to attain financial freedom.

If you have a financial plan, you have choices – and having choices means you have the freedom to set goals and achieve the successful and satisfying life you deserve.

Most people don’t have a financial plan. We spend a lot of time planning for other aspects of our lives, such as our careers, marriages and having children, but many of us fail to build a plan to achieve our financial goals.

If you would like to stop wondering about whether you’ll ever realise your financial goals, you need to build a plan to actually reach them.

•   Talk to your partner
Most couples never talk to each other about their financial goals. If you’re in a relationship, before you roll up your sleeves and dig into the numbers, talk to your partner about what you want to accomplish. Prioritise and agree on your short-, medium- and long-term goals and write them down.

•   Determine your current situation
Most couples never talk to each other about their financial goals. If you're in a relationship, before you roll up your sleeves and dig into the numbers, talk to your partner about what you want to accomplish. Prioritise and agree on your short-, medium- and long-term goals and write them down.

•   Determine your current situation
Before you start worrying about where you want to go, you first have to figure out where you are now. In this step you’ll create a net worth statement, which is essentially an honest measure of your current wealth. You do this by tallying up the value of what you own (your assets) and what you owe (your liabilities). When you subtract your liabilities from your assets, you get a number that represents your net worth. Your net worth statement is an important tool that charts your financial progress over the years. For instance, if your net worth is going down, you’re eroding your wealth and making it harder to achieve your goals. If it’s increasing, you’re on your way to getting richer and achieving your financial goals.

•   Track what you spend
The key to building a strong financial plan for the future is to understand how much you spend and save right now. This is called tracking your cash flow, and it can give you a sense of control and confidence that makes it easier to make financial changes in your life.

Keeping track of your spending helps to modify your behaviour if your spending gets out of control. It’s not always easy and most people dread taking a really close look at their expenses, but it works.

The point of the exercise is to find out whether you finish each year with a cash surplus or a cash deficit. This number will tell you a lot about your general financial shape. A surplus means you’re living within your means, while a deficit shows you’re spending more than you earn. If you have a deficit, you will have to cut your expenses (or increase your income) to achieve any financial goals.

•   Adjust your spending
Look closer. Are your expenses higher than your income? If so, you’re living beyond your means. You’ll need to adjust your expenses accordingly so you don’t go further into debt.

This step is not about punishing yourself or laying blame. If you’d rather eat out four times a week than pay off your house quicker, that’s your choice. But be honest about what you’re doing so you’re not wondering why you can’t reach your financial goals.

•   Set your life goals
Financial goals don’t just happen. You make them happen. This step requires you to assess where you want to be five, 10 and 20 years from now and answer some big questions.

•   Develop a strategy
Once you know where you’re going, you need a plan to get there. The usual route is to spend less than you earn and invest the surplus in such a way that you can get where you want to go.

Pay off your debt first. If you’ve identified your goals but you’re in debt, it would be wise to first pay off the debt before you start investing for the future.

•   See a financial advisor
Team up with a financial advisor that can help you to evaluate your current life assurance and investment portfolio and work out a plan of where the shortfalls are and what the most tax-efficient investment options are.

•   Ensure you have a Last Will and Testament
Every adult who owns assets and has a spouse or children should have a Will. An accurate and up-to-date Will is the only way to ensure your assets will be distributed the way you want them to be. MISA offers this service free of charge to members.

•   Create your final plan

A typical financial plan has five main parts.

The first outlines where you stand right now: your current situation.

The second contains your top financial goals, or where you want to go.

The third is a simple net worth statement.

The fourth lists the steps you must take to achieve your goals. It includes your income and expenses, an overview of your insurance, a section on retirement planning, and a section on estate planning.

Finally, the fifth section is your Investment Policy Statement, which lays out how your portfolio is to be invested.

You now have a financial plan for the rest of your life. From this point on, as your goals change, modifications to your basic plan will be straightforward.

Of course you still have to follow your plan. But you’ll probably find that the process of putting it together has already changed some of your beliefs about how your money should be spent and invested, so changing your financial behaviour may not be as hard as you think.

To make sure you stay on track, you should take the time to review your plan at least once a year, and update it as necessary.

Article reworked using tips by Julie Cazzin from an article titled 11 Steps to financial freedom, published on MoneySense.

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