The new year is here, and now is the time to create financial goals to help you get on track and set yourself up for a more financially stable future. Sometimes, getting your finances organized can be a daunting task, but by setting a few yearly goals, it can be easier than you think. Start your year off right by revisiting the five financial basics listed below.
1. Draft a Monthly Spending Plan
Even though this may seem like a common goal, many people find it hard to complete this task each month and stick to it. A monthly spending plan is the beginning of gaining better control of your finances, and the more detailed it is, the better. When creating your plan, make sure that every penny is accounted for, including savings, investments, clothing, food, entertainment, etc. It will not only help you realize how much cash comes in and goes out each month, but it will also help you focus on areas where you can improve and visualize where any extra cash flow can be best directed to align with what you want to accomplish.
2. Take Control of Your Debt
Debt can be one of the primary factors that can hold you back from financial success, especially with interest rates on the rise. Make a reasonable plan to reduce your debt. You can start by determining a reasonable amount of debt that you would like to reduce for the year, making sure that the goal is attainable. Next, determine how much you will need to pay each month in order to reduce your debt by the goal amount. Finally, you will need to look at your budget and find a way to fit in this amount each month, even if it means cutting back on other areas. It is also important to make sure that you do not add any more debt throughout the year.
3. Make an Emergency Fund a Priority
Medical costs, major vehicle repairs, job layoffs, or house maintenance can quickly derail a budget. Make sure that you have a fund set up specifically to handle these unforeseen expenses, so you don't have to alter your monthly budget to accommodate. A good rule of thumb for an emergency fund is to start with a month’s income plus $1,000. Once this goal is achieved, you should keep saving until you have about six months of expenses. Set aside an amount each month in your budget to add to your emergency fund. If you need to use it for an emergency during the year, you will need to regrow it.
4. Prioritize Retirement Savings
Saving for retirement is something often put on the back burner until it is too late. The sooner you begin saving for retirement, the more time it will have to grow, and the better return you will have on your investment. Time is your most valuable asset. Work with your financial planner to determine what retirement savings vehicles may be best for you.
5. Create a Long-Term Financial Plan
Goals can be more difficult to set if you are having difficulty envisioning the rewards that will come with financial stability. Consider any long-term financial aspirations you may have, such as buying a house or early retirement. Draft out a plan that includes savings, investing, and other ways to build the wealth you need to achieve these goals. You can start with smaller goals, so they seem less daunting. Having a plan in place will help you stay on track and guide your financial decisions.
Make this the year you take control of your finances and get back on track. Consider the five financial basics listed above to help you get started.
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