Do you have a financial plan?

Irrespective of how much time you spend on your personal finances, or how much you earn or spend or save .. you should have a financial plan as soon as you get independent and start earning. Or at-least when you start a family.

I have seen people worrying much about small things, while not giving adequate attention to the long term goals. I remember discussing with a colleague who keeps tracking each and every penny that he spends on what ever he does. I don't say it's completely waste, but does it really have ROI? beyond some analytics on top of that data and an exact total you spend every month - what else does an individual get?

I would rather suggest to worry about bigger things like

• how much money do you need to retire?
• when do you actually want to retire?
• what are your recurring goals?
• do you need a term insurance?
• does your family needs a health cover?
• what are the key skills you have and how you can leverage them?
• and so on .. 

Beleive me smaller financial things in life would automatically fall in place. If you don't do it already, start thinking now about the buckets of investment. Allocate a specific amount to your monthly expense bucket and use whatever it has to do whatever you want. Rest all goes towards building corpus for your goals.

There are always two ways you can approach your investments

• Income - expense = savings 
• Income - savings = expense 

And second is the approach you should be really following. If you really want to meet your goals and want to measure if you can actually be there in time with right amount of money, I would suggest you start with following simple exercise

• Make some assumptions about the following - your date of retirement, the amount you want to retire with, rate of inflation, %age return on your savings. etc. 
• Start with your Networth
• And then cashflow statement 
• Determine your goals, how much you need by when for what?  
• And start measuring, do you save and invest enough to take you there?

Here is an excel that can help you with this basic exercise.