Sound financial planning will help ease fluctuations in income, prepare you for unforeseen expenditures and protect what youve worked for. To secure your future, follow these basic steps to financial stability:
Step 1: Devise a long-term plan. Begin by writing down your sources of expected income from sales of artwork, grants, part-time work, teaching and investment income (stocks and bonds). Then record your annual anticipated expenses, including art supplies, marketing efforts, rent, utility bills, loan payments, etc., as well as big expenditures, such as a childs college education or wedding, over the course of your future life.
Step 2: Prepare your annual budget. Add up the income you expect to earn in one year, then add up your anticipated living and working expenses. Start by calculating your expenses per month, and then multiply the figure by 12 to get an annualized amount. Now subtract your anticipated expenses from your anticipated income. With the amount that remains, you can begin a savings and investment program.
Step 3: Invest your savings. Consider placing money in a savings account, buying a certificate of deposit (CD), investing in a mutual fund, purchasing a U.S. savings bond or placing funds in any of the other thousands of available investment accounts. You might want to consult a Certified Financial Planner for advice on your best options.
Step 4: Keep track of your actual income and expenses. This will help you determine how much tax you owe, and let you know if youre on track with your long-term plan.
,bStep 5: Once a year, evaluate your progress by looking at your plan, your budget, your records and your yearly financial statements. If your expenses are too high or your income is too low, youll need to increase your savings rate. Likewise, if youre saving more than you planned, maybe its time to spend some money on yourself and take a vacation.