A goal without a plan is little more than a daydream. Meanwhile, everything with which you come into contact every day is the result of a plan — and a well-executed one at that.
How can we know it was well-executed you ask?
With that in mind, if your goal is long-term financial stability — and that’s certainly a worthy one to have — you’re going to need to set about crafting a financial plan that works.
Define Your Financial Goals
You need to do more than say “I want to retire debt-free.” You must define the steps you’ll take to get there so you can break them down into their constituent tasks.
Maybe you want to live in Bora Bora; maybe you just want to get a nice house in a nice neighborhood and have it paid off in 15 years. Whatever your goal, it’s important to write it down and outline a plan of action for achieving it.
Putting it in writing makes it tangible and gives you a frame of reference by which to measure your progress.
Every solid financial plan must include debt eradication if it is to be successful. One of your first steps should be to rid yourself of financial obligations such as credit card bills, medical debt and the like.
If that looks particularly difficult, a consultation with a debt specialist might help you find a way to do it more effectively. Just be careful to choose a reputable firm. Poring over information like will help you find legitimate people. You can then develop a plan and work it steadily.
Include an Emergency Fund
In your zeal to reach your long-term goals, it’s all too easy to overlook the near- and mid-term possibilities. One of the tools you can use to mitigate unexpected expenses is an emergency fund.
Experts tend to agree a fully formed emergency fund is comprised of at least three to six months of your living expenses — including rent/mortgage payments. With this on hand, you’ll be positioned to deal with difficulties without incurring debt.
Secure Your Future Needs
With your emergency account fully funded, your next priority should be to ensure your financial stability during your retirement years. A financial planner can help you choose the best vehicle to accommodate your long-term goals.
If you have children, you’re going to need to start a college fund too. If you’re renting, you might want to consider putting away for a down payment to do a buy. All of these moves will ensure you have the cash you need when the necessity arises.
Put Your Money to Work
With your long-term finances in play, your next move should be to set your money up to multiply itself. Here, too, you’ll need to settle upon some objectives. You must have an idea of what you want the money to do and consider the time horizon for when you’ll need it.
This, in turn, will dictate the nature of the investments you choose. If you’re going to need the money in five years or so, your best bet is something like a high-interest savings account. If you’re going out farther in time, you can consider mutual funds, real estate, bonds and the like. Whatever you choose, just make sure it’s capable of meeting your needs.
These are the basic elements of any good financial plan. You’ll also need to make allowances for insurance — as well as taxes — and dictate what will happen to your estate when you die. As you can see, crafting a financial plan that works is something to which you’ll need to give some thought. However, the peace of mind you’ll derive from having done so is more than worthwhile.