Establish Your Personal Financial Plan
When you hear people encourage you to develop a “financial plan” it can sound dry and boring.
This is probably why many people put off developing a set of goals until much later in life.
The problem with this is that by then, they may not have realized all of the lost opportunities for saving, curbing debt and investing, and as a result, are in a less favorable financial position than they could have been.
So rather than thinking of your financial plan as a mundane chore, consider it your path to financial freedom!
Establishing a money map to follow can help you make smart decisions that may have big pay-offs later. So grab your computer, get comfortable and examine a list of the top considerations you should weigh in to help you develop a customized and successful plan.
Outline your specific goals
It’s time to do away with the vague goals, such as, “I want to save enough to retire comfortably,” or, “I want to get out of debt.” Instead, you want to set goals that you can quantify and set a list of realistic deadlines to accomplish these aims. For example, instead of saying you want to pay off your student loans, make a goal to pay off the full amount by a certain date. Having a firm date in mind can motivate you and enable you to crunch the numbers so you know how much to put toward your debt.
Are you saving enough?
One of the key mistakes some people make when setting a financial plan is failing to assess their savings. You may think that by saving 5 percent of each paycheck, you are on the right track. While this is a great start, you might be surprised to find that it’s not enough if you’re saving for a down payment, planning your wedding or putting money aside for retirement. You should have a firm idea of exactly how much you need to save in order to reach a certain goal and rearrange your finances accordingly.
Are you maximizing your repayment plans?
Sure, you make your minimum credit card payments each month, but have you calculated how long it will take you to pay off the balance? If you’re serious about eliminating your balances, it’s time to start making cut-backs elsewhere to put more toward your debt. You might have to say goodbye to your morning lattes and weekly pedicures, but this can free up more income to help you break the cycle of debt.