Financial planning can help consumers set important financial milestones and determine whether they are on track to meet these goals. A financial plan can provide a source of direction and accountability. With a plan in place, a person may have the ability to pay off debt and save for a better and more financially stable future. Here are some financial planning tips:
What You Need For A Financial Plan Now
Getting started with a financial plan does not require any expensive tools or equipment. Simply sit down and write down a list of financial goals. These goals are different for everyone but may include paying off debt, saving for a child’s education, saving for a down payment on a home or saving for retirement. Next, create a list of income and another list of debts. This is the starting point of a financial plan.
Financial Planning Tips
The financial planning process involves a series of steps designed to help a consumer get better acquainted with their money and learn the proper steps to gain control of their finances.
Get Paid What You Are Worth And Spend Less Then You Earn
Not everyone knows how much they are really worth. Staying in a job that does not pay well due to comfort or unwillingness to look elsewhere for work can result in lost opportunities to build wealth. It is important for consumers to know what they are worth based on their experience, education level and certifications. In addition to getting paid fairly, consumers should practice spending less than they earn. Cutting costs can leave a significant amount in a person’s budget to put towards goals.
Stick To A Budget
A budget is a financial plan that outlines an estimation of income and expenses over a period of time, such as a weekly budget, monthly budget or annual budget. This financial plan is designed to help consumers determine the best way to spend money. Some people do not know where their money is going which can result in an accumulation of debt and an inability to pay bills. When they create a budget, they can allocate where each dollar goes from each paycheck. Creating a budget is an important step in the financial planning process regardless of how much someone earns.
Pay Off Credit Card Debt
The average U.S. household has approximately $5,700 in debt, according to recent data published by the U.S. Federal Reserve. Credit card debt can put a major strain on a person’s finances due to high-interest rates and an inability to pay off balances at the end of the month. A financial plan should include a strategic plan to pay off credit card debt within a specified period of time by not using the cards until the balance is paid down and by making payments that are higher than the minimum amount required.
Contribute To A Retirement Fund
The mean retirement savings for working households between the ages of 32 and 61 is approximately $95,776, according to the Economic Policy Institute. If an employer offers a retirement savings account, such as a 401(k) plan, consider contributing to it to build a retirement nest egg. Many employers will match contributions made to 401(k) plans up to a certain percent which can help employees save faster. This is referred to as an employer match. If an employer does not offer a 401(k) plan, consider other retirement plan accounts, such as an IRA. An Individual Retirement Account (IRA) is an account set up at a financial institution that allows retirement funds to grow tax-free or on a tax-deferred basis.
Have A Saving Plan
Emergencies can happen at any time and it is important to be prepared for when they do. If someone in the household lost their job or became extremely ill, having an emergency fund available could provide financial relief during this difficult time. Ideally, consumers should set aside a percentage of their income to put towards savings. Having money automatically deducted from paychecks or transferring money to a savings account before paying bills can help create an emergency fund that continues to grow over time.
Keep Good Records And Check-In
It is important to keep good records throughout the financial planning process and thereafter. These records can be useful throughout a person’s life, such as when they complete their income taxes. Create a system for storing financial records and go over these records on a regular basis to ensure that all information is correct and that there are no opportunities that have been missed.
Speak With A Financial Planning Professional For More Financial Planning Tips
The financial planning process can be challenging, especially for individuals who are new to budgeting and saving. Fortunately, an experienced financial planning professional can help with the process. For more information about financial planning or to speak to a reputable financial planner, contact the professionals at Campbell Wealth Management, Inc.