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Financial planning can be broken up into three major categories: (1) the past; (2) the present; and (3) the future. If you create a financial plan around these three time-frames/categories, you will be able to create an effective financial plan that yields great results. Keep in mind that some categories will require more planning and more in depth plans that will other categories. Additionally, some categories are more important than others. Therefore, your plan should reflect these facts and should be set up in a way to maximize the effectiveness of each category.

THE PAST

The past are bills and/or problems that arose in the past and need to be paid off and remedied in order to produce the most effective financial plans for the other categories. Things such as negative credit report information and collection accounts that were posted on your credit report as a result of past financial problems need to be corrected and removed from your credit report in order to proceed in the best possible way. Therefore, send dispute letters, hire a credit repair company (making sure it is reputable and the fee charged is fair in light of the problems they will correct), or work with those creditors in order to solve the problem. The point is, you have to take action in order to fix the past problems.

Fix these past problems so that they do not affect your present and future financial plans.

THE PRESENT

The present is the most important part of your financial plan, because without a present, you have no future. If you cannot financially survive given your current situation, retirement and other future plans are just going to be a pipe dream. Therefore, you have to get your present situation under control.

Carefully analyze your expenses and make changes (if possible) to reduce the amount of your monthly liabilities. Remember, it is always easier to cut costs than it is to produce revenue. Therefore, cut all extravagant costs that you can live without. This does not mean that you cut out all money for entertainment purposes. Entertainment is necessary to keep one's sanity. Therefore, do not completely cut the budget for entertainment, but make sure that it is minimized.

In addition to expense reduction, you need to consider investments and other income producing strategies that will help your present situation. Seek the help of a financial planner or some other financial expert if you do not know where to start.

THE FUTURE

Your future is important because you want to be able to retire comfortably at a younger age, put your kids through college, and not have to worry about any bills or other expenses. As such, planning for your future is an important part of financial planning.

Things you do in the present will affect your future. As such in order to plan for the future, you have to take action in the present. Look into investment devices such as IRA's, savings accounts, employment retirement plans (such as a 401(k)), and college fund accounts, during your present so that these investments will prosper into wonderful, future profits.

Once again, if you do not know where to start, seek the help of a financial expert so that you can begin to take action. Procrastination can really cause a large dent in future investment amounts. The longer you wait to plan for your future, the less time things, like compound interest, have to make you money.

Create a financial plan based upon these three categories and you can create a financial plan that is effective and profitable.

Learn more about this author, Marco Angioni II.
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