Coming up with a plan is always the best way to achieve your goals.
No matter what you want to achieve, taking an organized approach increases the likelihood that you’ll succeed.
So how do you create a financial plan for your goals? Follow these 3 pieces of advice:
Create a Monthly Budget
A well-organized budget is the cornerstone of any successful financial plan. With a budget, you can track where every dollar of your income is going and get a true understanding of your expenses.
It’s a tool that can help you manage your spending and put you on track to achieve both your short- and long-term financial goals.
If you’re new to budgeting, then perhaps you’re wondering how to get started. The truth is that there are many ways to go about designing a budget, and many different ideologies that influence budgeting decisions.
But the first step is always to compare your monthly take-home income with your expenses.
Sit down and add up all of your expenses in a month, being as detailed as possible. Include fixed costs like rent and utilities, in addition to other expenses such as entertainment, restaurant bills, and debt payments.
This will give you a good idea of how much money is coming and how much is going out on a month-to-month basis. With this information, you can identify places to cut costs, build your savings, and prepare for the future.
There are many different philosophies when it comes to designing a budget, and you should do some experimenting in order to find one that works for you.
You might also consider checking out financial planning software that can help you come up with a personalized strategy for managing your money.
Set Financial Goals
When it comes to personal finance, goal-setting is essential. Your financial goals help to guide your spending habits and money management strategy.
After all, how can you possibly create a financial plan if you don’t know what you’re working towards?
While personal financial goals differ from person-to-person, effective goal-setting follows a common set of principles. One of the most popular goal-setting techniques goes by the name of SMART goals.
SMART is an acronym to help you remember that each of your goals should be:
- Specific—straightforward and clearly defined.
- Measurable—how will you measure your progress?
- Achievable—something that you can realistically accomplish.
- Relevant—how will achieving this help you?
- Time-bound—set a deadline to guide your work.
An example of a SMART goal would be something along the lines of, “I will save up $500 by March in order to buy my daughter a bike for her birthday.”
By following the SMART goal system, you’ll be able to set actionable goals that you can work towards achieving.
Deal with Outstanding Debt
Did you know that nearly 80% of Americans are in some kind of debt? It’s a huge source of stress, and a problem that a majority of the country is wrapped up in.
Debt can be a setback that stands in the way of you achieving your financial goals. That’s why it’s important to pay off any outstanding debts you have as soon as possible, so that it stops eating away at every one of your paychecks.
Debt can mean a lot of different things: Student loans, home loans, car loans, credit card payments, and more.
Essentially, whenever you owe an individual or organization a sum of money, you’re in debt.
However, there are a number of strategies you can employ in order to get yourself out of debt.
First, by creating a budget you can design a plan to get out of debt where you put aside a certain amount of money each month to pay off the total liability in a given timeframe.
You should pay off the debts with the highest interests rates first, and then you’ll have more money available to pay off the rest.
Alternatively, if you’re in a tight financial position you may be able to negotiate your debt down.
Your creditor would rather receive some form of payment than write it off as a loss, so try to explain your financial situation to them and present them with a reasonable repayment plan in an effort to reduce the debt.
In most cases, you won’t be achieving your goals overnight.
So be patient and stay faithful to your financial plan. As they say, slow and steady wins the race.