- It is essential that your financial plan includes goals that you are looking to achieve in the future. Identify financial goals that are important to you, and focus on those first. Look for goals that will help you feel financially and personally fulfilled and start working towards them immediately. Include your spouse or children in the family goal setting. If you get off track in working toward your goals, get back on track as soon as possible.
- Your written budget is one of the most important components of a financial plan. You must give your money a purpose and determine where every dollar will be spent before the month begins. Most people report that when they do this, it is like getting a raise because they are now in control of their finances. Plan for each category of spending by setting a realistic amount that you will spend each month. Change the amount as necessary from month to month, but do your best to live within the plan.
- Consumer debt can derail the best financial plans by draining your income over many years with payments and finance charges. Any good financial plan must include a a debt-management component. Consider making a commitment to operate debt-free as much as you can, and to pay off any consumer debt that you have at the present time as soon as possible. The quicker you get out of debt, the more money you can commit to other areas of your financial plan.
- Even if you are young and in good health, retirement will come sooner then you think. Start saving as soon as possible for that day. The more time your money has to grow in tax-advantaged retirement plans, the more comfortable your retirement will be. If your employer has a 401k or other plan that matches a portion of your contributions, contribute enough to earn the full match. Consider starting a Roth IRA as well, because this allows your money to grow tax-free. Invest your retirement fund in long-term investments, such as stocks or stock market mutual funds. Save as much money as possible in retirement funds.
- A financial plan is not complete without insurance to protect you in case something happens to jeopardize your income. You should have life insurance to replace your income in case you die while others are still dependent on your earning power. Many experts recommend carrying life insurance with a face value of eight to 10 times your annual salary. In addition to life insurance, long-term disability insurance is important protection if you become disabled and unable to work. You should purchase enough disability insurance to replace 60 to 80 percent of your income.
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