Financial planning is one of the keys to a blissful future. It sets your life up for less worry and concern about stability as you get older. You can also secure your family’s future as well.
Following tried and true tips is a great way to put yourself on the right track. So what are the tips? This guide explains 7 financial tips everyone should know.
- Set Short Term and Long Term Financial Goals
It can be tough to save if you don’t have clear financial goals. You’re likely spend more when you know there’s money lying idle in your account. This is one reason 55% of Americans have credit card debt.
You can reprogram poor spending habits with intentional action. Setting financial goals motivates you to stay on track with the right behaviors. If you’re thinking of ways to save money, also have reasons or goals to drive your intentions.
Determine something you want or need for the future and figure out how you can save to finance it. The want has to be something that improves the quality of your life and your financial security. If it’s an emergency fund, know the total target and dedicate a monthly amount towards it.
- Create and Stick to a Monthly Budget
Creating and sticking to a monthly budget is necessary for better personal finances. A budget brings rationale spending and enables you to become self-sufficient.
If you want to improve financial control, you need to understand your cash flow. Have a complete picture of your total income. Factor in the money that comes from your primary job and side businesses.
Next, get a clear picture of your expenses. Record your weekly expenses to know where your money goes. Also, track the fixed bills to see if they are within a reasonable range. As a rule, your fixed costs should not go beyond 50% of your income.
Paying yourself is one of the most recommended financial planning tips today. Financial experts say this is the golden rule of personal finance. Once you receive your paycheck, put away at least 20% of the total to your savings or investment account.
Next, assign the remaining amount to your expenses. It would be best if you focus expenditure on needs. Set aside money for the things that you can’t do without. Being frugal can leave you with more money at the end of the month to boost your savings.
- Cut on Expenses to Save More
Sometimes you have to be ruthless to improve your financial health. Know that you need great financial discipline to reach your saving goals. Without making extreme changes, your debt may not stop increasing.
Look at your variable expenses to see if you can cut them. There are plenty of ways to save money by cutting expenses without lowering the quality of your life.
Audit your utility expenditures and create a plan to cut usage. Small changes like unplugging electronics and appliances to prevent can decrease phantom energy costs.
Also, look at where you leak money like in your subscription costs. Try to cut down to necessities and only services that you use on a daily basis.
- Learn Ways of Investing Your Savings
Saving makes financial sense if you invest the accumulated amounts. You can incur losses on your savings if inflation is high or persists. For instance, if you save $10,000 per year without investing in it, you could lose $100 if the inflation rate is 1%.
Saving and investing are some of the best financial planning tips to make your money grow. You have to make your money work for you.
Some top ways to invest money include:
- Retirement accounts Roth IRA or 401 (K)
- Stocks for long term investing and passive income from dividends
- Bonds where you loan your money to a company in return for interest
- Real estate investment (you can flip houses, invest in REITS or become a rental property owner)
- Crowdfunding (invest your money in small businesses for projected return on your investments)
- Peer-to-peer lending platforms can allow you to lend money to other individuals
- Time-bound certificates of deposits
- High yield savings accounts
- Trading commodities
Positive wealth growth happens when investment gains are higher than the inflation rate.
- Get Out of Debt
The only way out of debt is through it. The first step to cutting debt is to avoid new loans. Avoid carrying your credit card around and keep off all spending temptations.
Once you stop taking on new loans, start paying off the existing ones. Try to speed up payments by paying more than the minimum amount. Doing so will help reduce interest payments.
Another way is to use the debt snowball method. Commit to clear loans starting with the small ones. That way, debt overload on your paycheck reduces and you can commit more amounts to the larger loan.
- Plan for Your Retirement
Retirement planning is more of a necessity due to many societal changes. Medical insurance is getting more expensive and social security isn’t as guaranteed as it used to be.
Write down your retirement goals and figure out how much it’ll cost to meet those goals. Remember to factor in inflation. The USA’s inflation rate between 1913-2013 was 3.22%. So set a higher figure to accommodate potential fluctuations.
Figure out what costs will increase or decrease. You might own a house but your medicare costs will be high. Also, think about your post-working income and how much you’ll make from your investments, pension, savings and social security?
The projected income should cover your post-working expenses. If you foresee a deficit, then it’s time to figure out more ways to save money for your retirement.
- Walk the Path with a Financial Advisor
Financial planning is easier said than done. Most people who commit to better personal finances struggle with consistency. An expert financial advisor can take the time to understand your financial perspective.
Financial experts can also shed light on investing and help you see beyond your investment fears. See a financial advisor as an investment rather than an extra cost. If you’re looking for someone to point you in the right direction for your future, reach out to Matt Dixon.
Follow These Financial Planning Tips to Set Up Your Future
No one wants to worry about how they’ll be able to engage their later years in life. The best thing to do is think ahead and take action today for tomorrow. Start securing your future today with our financial planning tips.
For more financial tips and advice, check out our blog.