Anything worthwhile is going to take a bit of work. This is an old piece of advice, but it’s amazing how often we tend to try to ignore or forget it. It’s true in all areas of life, but it’s certainly true in terms of how we approach finances and money.
Financial planning makes many people nervous, and it’s easy to see why. Sometimes thinking about the rest of your life in terms of money can feel overwhelming.
But proper planning and strategy implementation can make a world of difference when it comes to your stability later in life. Long-term financial planning can help you reach long-term goals and allow you to take major life steps. Read on, and we’ll walk you through some of the best financial planning strategies that you can employ in your own life.
Don’t Carry Around Debt
Sometimes we don’t have the money we need. This is just a simple reality, a fact of life. Most American families live paycheck to paycheck, and barely have enough money to cover their general needs.
That means when a big emergency arises, or an exciting opportunity is presented, most don’t have the money they need available to them. So they borrow: from banks, from credit card companies, or from other various kinds of money-lenders.
This is an easy way to build up debt, and many people struggle under this debt for much of their lives. If you want to plan a strong financial future, you first need to put your resources towards getting out of debt.
It doesn’t make sense to start saving money as the amount that you owe others just grows in size. Paying off debt as quickly and efficiently as possible will help to minimize the total amount you end up paying. It’ll also help wipe the slate clean and provide you a clean path to move forward on.
Paying off debt can take a lot of work and discipline. But it is possible, and very worthwhile. Once you’re out of debt, you can begin to take steps to save up and prevent yourself from having to go into debt in the future.
Keep An Emergency Fund On Hand
How can you avoid debt in the future? Always make sure that you have the money that you might need. Most people refer to this kind of nest egg as an emergency fund– some money that you’ve set aside in case disaster strikes.
You never know what might happen in life! It could be anything from a sudden car accident to the legal need to hire a maritime lawyer. You need to be prepared for the expenses involved with the unexpected.
Experts vary opinions on what the size of this fund should be, but most agree that it should be large enough that you could live off of it for six months without working. This cushion should be enough to cover you through even the most extreme of hard times.
It’s important that you’re tight and vigilant when it comes to this fund. Do not take money out of it for any other reason than a real emergency. If you take money from it every time a mildly exciting opportunity presents itself, you’ll have drained it no time. That’s not smart financial planning.
When you do have to dip into your emergency fund, you should work to get it back up to its full value as soon as you can. You always want to have that cushion just in case– that’s the best financial strategy.
Invest In Your Later Years
Eventually, the day will come when you’re done working and you want to retire. It’s important that you save for this date, even if it feels very far in the future. The best way to do this is to try and set some money aside at the end of each year to put towards retirement.
15% of your total income is a good goal, but not everyone will be able to reach that number instantly. You can work up towards it over the years as your income becomes more stable.
If you have the opportunity to put money in a 401k at work, you definitely should. But it’s also worth looking at putting more money aside in a Roth account, so that you can increase the amount you’ll be making in the many years left until you retire.
This is why it’s beneficial to start saving for retirement as early as possible. The more money that you can put into a savings account, the more interest it will incur overtime. This means, over the course of many years, you might be able to make thousands of dollars simply by letting your money sit and grow.
If you want to really make some extra money, you can invest extra income elsewhere: in mutual funds, CDs, or real estate. Diversifying your investments can help protect you against risk in case one area goes through a rough patch. With money in multiple places, you’ll have set up a beautiful financial garden that you can watch grow as you move on through the years.
The Best Financial Planning Practices
Financial planning is an essential step in putting together a positive and stable future for yourself. The above tips and strategies can help you lay the groundwork for a brighter tomorrow.
Need more help managing your money? Check out our financial page for more advice.