Worried of exhausting your bank balance? Tired of not reaching your financial goals? Stressed how to start financial planning?
Financial anxiety is real and it can creep in more when you see other people of your age are managing it well! However, we believe everyone has their own pace to put things on track. We also believe that noticing the fact that you are lagging behind is the first step that you have already taken! The next step is to dive in at once. Even if you make a few bad choices along the way, it’s okay. That’s better than to sit on the sidelines worrying that you won’t make the best possible choice. Because once you start, you can seize more opportunities for growth and experiences, and that it’s important to put your financial planning on track!
Here are a few simple yet effective ways to plan your finances. The most important key is start today!
Where you stand? Know that
Knowing where you stand is an important step even before you start planning for your finances. Where you stand implies what numbers you’re working with and how they add up. Start by taking financial inventory- credit score, debt load, account balances, assets, net worth. There are many free tacking software available online that can give you a clear idea where you stand financially at any given moment.
Where you want to head? Define your goal.
Any planning without a certain goal is a failed plan. After you figure out where you stand, it’s time to decide where you want to go. Make a list of your goals, the relative timeline and cost for each, and then prioritize from top to bottom. Only once you’ve marked both the origin and the destination, you can decide on the best route to take in order to reach the finish line.
Financial Planning? That’s the next step
Once you’ve taken your inventory and defined your goal, you should have a pretty clear idea of how much money you have and how much you need in order to tackle that list of prioritized goals. The next steps are to decide whether you need to pay off your debt or you need to begin contributing towards a retirement account or emergency fund. Or whether to save up for a down payment! There could be a lot many goals and seemingly never enough money to fund them all. So prioritize and act accordingly.
Stuck now? Categorizing Financial Goals will help
Ideally, you can fund all of your goal categories in addition to covering your monthly expenses – designating larger percentages of income to the goals you’re pursuing most aggressively. Unfortunately, reality isn’t always ideal, and income restrictions necessitate the prioritization of some financial goal categories over others. We recommend starting with emergency savings and debt payoff. With the given budget, if you can sneak even the tiniest bit of retirement savings into the equation that would be ideal, especially if your debt is low interest.
Besides, these funds, you should also save fund for your short and medium term goals – like having a family, owning a home, travelling, etc. These funding should be independent and not be connected with the retirement or emergency fund.
If you find yourself stretched thin in an attempt to fund all savings categories, you most definitely need to consider ways of increasing your income (a side hustle maybe or investment option to be considered). There are only so many ways you can save money an cut back on your day-to-day expenses. Earning potential however is unlimited, and the freedom and flexibility that comes with increased income is a game-changer for your financial and life goals.
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