Talk to anybody who works in finance
and they'll all tell you the same thing. It's never too early to think about
retirement. For many people in their 20s and 30s, retirement seems like a long
way away.
While you may not be thinking of
retirement yet, it's important to have a plan. More importantly, you need the
right plan for you. Creating a financial plan for a waiter is different than
creating one for a software developer.
Even though the plan might be different,
any strategy has the same goal: Getting ahead. Use these nine financial
planning tips to start your mission.
1.
Spend Less Than You Earn
Simple, right? You know that it's
not. As wages plateaued over the last 40 years, the prices
of goods and services continued to rise. To put it another way, your earnings
don't stretch as far as they used to.
It's important to evaluate the job
market regularly to make sure you earn your fair market value. This means
searching for new jobs in related fields, and always having your resume updated
and ready.
If you're a valuable team member,
this gives you leverage with your current place of employment to ask for a
raise. If a raise doesn't come, you move on to a higher paying position.
This important financial planning
tip is not only about spending less, it's about earning more so you can spend
less in proportion rather than a dollar amount.
2.
Make a Budget and Keep It
Budgets are an important part of
building a financial plan no matter your income level. In some jobs, it's easy
to lose track of how much money you bring in versus how much goes out.
Consider the restaurant industry.
Waitstaff and bartenders who make cash tips punch out with large sums of paper
money in their pocket. It's all too easy to peel off a few 20s for after-work
drinks.
What's the big deal? That could be a
hundred dollars a week off the top of your earnings before you even get to the
tougher tasks of paying bills and saving for income tax payments.
A good budget is all about saving.
Add up your monthly expenses. Rent or mortgage, utilities, other bills,
groceries, and other expenses to determine how much money you have left for
recreation and savings.
We all need to have fun. Financial
plans aren't miserly exercises meant to sap the joy of small pleasures out of
life. They're meant to give you peace of mind so you can have more fun.
3.
Savings Savings Savings
It's all about savings. Figure out a
percentage of your take-home pay that works for you and deposit it every
paycheck. Every paycheck! It's far too easy to put off saving when money is
tight.
You think you'll deposit a large sum
next payday. Then next payday comes and there are still more hands in
your pocket. Saving for the long-term is about sustainable increments.
Whether it's $50 per pay or 10%,
find the number that works best and stick to it. You need financial planning thats right for you.
4.
Eliminate Credit Card Debt
In the United States, there is over
1 trillion dollars in outstanding credit card debt. Given that over half of all
Americans carry some amount of credit card debt, you might have some yourself.
Get rid of it. When thinking about
how to create a financial plan, getting rid of credit card debt needs to be top
of mind. Why? Interest. When you use your credit card, you will pay more than
the original price.
This interest build-up is a huge
inhibitor for your future finances. Once you pay your debt, limit your card use
for unexpected financial emergencies.
5.
Manage Your Student Loans
If you're under the age of 50,
student loans are part of your life. If you were lucky, you were able to pay
them off. Many are not that lucky. Though there is talk of loan forgiveness,
don't rely on politicians to solve your student loan payments.
If possible, turn toward
consolidation or an IBR repayment plan. These income-based plans will help
you better budget your payments with a goal toward full repayment.
6.
Health Insurance
You think, how am I supposed to
spend less than I earn with health insurance premiums so high? While nobody argues
that health insurance isn't expensive, this is about the negative cost.
What will happen to your savings if
you fall ill without health insurance? You must have some kind of coverage to
offset potential medical costs.
7.
Value Spending
When creating a financial plan, you
need to place value on your expenditures other than dollar amounts. This will
help you prioritize your spending and change the way you think about your
expenditures.
What's important to you? Is it
traveling abroad? If so, travel expenditures have a value higher than your
other expenditures and your spending should focus on that. Placing value helps
you eliminate wasteful purchases.
8.
Retirement Savings
If your workplace offers a 401k or
other retirement savings plan, take advantage of it. It's an easy way to save
for retirement because the money you contribute comes right out of your
paycheck.
Think outside the box, too. If you
can, hire a professional to help your retirement investment strategy. That way
you will get the most out of the money you set aside.
9.
Set Goals
When financial planning, it's
important to have short and long-term goals. A short-term goal might be
replenishing your yearly vacation fund. A long-term goal might be the dollar
amount associated with a comfortable retirement.
Making goals, sticking to them, and
meeting them keeps your financial planning focused.
The
Best Financial Planning Tips
The best financial planning tips
give you a foundation for your plan. Everyone's situation is different, though,
and you need to find a plan you can work with.
Make a budget you can keep, set
aside an amount that's comfortable for you, and learn to place value on your
expenditures other than dollar amounts. These are the flexible basics for any
great savings plan.
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