Steps in Planning for Financial Success
You can’t achieve financial freedom if you don’t know what it is that you really want to accomplish. The concept of being financially free should not be vague to you. In order for you to really achieve it, you need to have a goal. Thus, even before you start crating your plan, you should already have the end in sight. Financial planning starts with the success you envision for yourself.
Think about what it is that you really want to achieve in your life and the length of time in which you plan to achieve it. Do you want to pay off your mortgage in ten years? Do you want to have a net worth of $5 million by the time you retire? Do you want to open your own business in two years? Whatever it is that you decide to do, you should have this clearly visualized. Doing so will give you a direction to strive for.
It’s not enough that you only think of your financial goal. You should write it down. Writing down your goal makes you own it. When you own a goal, you are bound to achieve it because it’s already a part of your being. You are committed to making it come true. Remember that success does not happen overnight. It takes decades to accomplish and it all starts when you have a plan which you’ve already committed in writing.
Divide your goals into long-term and short-term goals. The long-term goals are those that you intend to accomplish far off into the future, say five or ten years from now. Perhaps you see your retirement as a time when you can finally fulfill your dream of starting your own business. Maybe you want to finish paying off your mortgage in ten years. Or perhaps you see yourself buying a vacation property in Hawaii in five years. Maybe you want to replace your outdated computer this year. Whatever goal you seek to achieve, see to it that it is time-bound. Setting a time frame for their accomplishment gives you a sense of urgency—that you should act now to achieve them. When goals aren’t time-bound, you develop a relaxed attitude towards them. This could set you back financially.
Obviously, you won’t know what goals to set if you don’t know what success means to you. How do you define success? For some, success means being a millionaire even before retirement, while for others it simply means having a happy family. Success is looked upon differently by various types of people so you should do a little introspection and think about what it is that you really want. Don’t let what media’s definition of success lure you into believing that this is what success really is. You should follow your own mind and heart.
Once you have already clarified your objectives and goals, the next step is to write down the practical steps you need to take so you can achieve them. A lot of number crunching is involved here. For instance, if your goal is to pay off your mortgage earlier than the terms you had originally signed in your mortgage documents, you need to make calculations on how much you need to add to your current mortgage payments so you can be mortgage-free in 10 or 15 years. If you want to retire with a million, you may also want to use online retirement calculators on how much you need to contribute to your retirement accounts so you can achieve this goal. If you want to buy a new laptop in the next six months, you may want to determine how much you want to set aside to be able to make the purchase. This may involve cutting down on other expenses or perhaps selling something you have that you don’t anymore need. If the item you want to buy is more expensive, you may want to consider looking at getting a part-time job to augment your income.
With all these practical steps in place, the next thing that you need to do is to implement your plan. This can only be made possible if you create a budget and stick to it. You will have to develop a lot of discipline and self-control because there will be a lot of temptations along the way.
A very crucial part in the implementation process is monitoring. You want to make sure that you are on track towards achieving your goals and that can be done if you constantly track whether the amount you have allocated for a particular project is going where it should be. You can do the checks monthly. This way, you will be able to make the necessary corrections in case you failed in one particular goal. Congratulate yourself with each goal accomplished. If you fail, assess the reason why and strive to get back on track.
Tips for Achieving Financial Success
Here are some things to keep in mind so that success becomes more attainable:
1. Don’t live beyond your means.
This should be very simple but a lot of people just live beyond what they make each month. Spending less than what you earn should be common sense but thanks to the influence of credit cards and advertising, many individuals fall into the debt trap and endanger their finances and their future greatly. It’s simple math: If you want to save and prepare for the future, you mustn’t spend more than what you earn. One practical way to do that is to steer clear of debt.
2. Assess where your attitude about money is coming from.
Our attitudes about money come from somewhere. It may be rooted deep in your childhood when you were given anything you asked for by your parents so you think that you’ll have inexhaustible supply of dollar bills when you want them. Or it could come from your father who kept on telling you to work hard to succeed. Whatever your attitude toward money is, make sure that you evaluate if it is contributing to the success or failure of your present financial plans.
3. Save, save, save.
You have to pay yourself first if you want to realize your retirement and other financial goals. Far too many people save only what is left of their salary. However, this is rarely effective because after everything else is spent, there is barely anything left over. The better way to go about the matter is to have your retirement contribution taken out automatically from your paycheck and arranging with your bank to have a set amount transferred to your savings account each month. All these steps make savings convenient and hassle-free. More importantly, it takes away the chore of depositing the money from your hands, ensuring that you will really set your savings aside.
4. Pay off debts and loans.
If you really want to get ahead financially, you want to remove the burden of credit card debts and other personal loans from your shoulders. Stop using your card for the meantime and work towards paying off every last bit of debt you owe on your credit cards or any other loans you have made except your mortgage and car loans. Once you have cleared yourself from these obligations, promise yourself never to get into any kind of debt again.
5. Get insurance coverage for really big risks.
Determine what kind of risks you have for your age and situation so that you can insure them appropriately. For example, life insurance should be a must for all breadwinners. Everyone should have health insurance regardless of age. If you are living in a flood plain, you must have flood insurance in addition to your current homeowner’s insurance. Consider getting an umbrella policy if you have substantial assets so you can protect yourself from lawsuits.
7. Know your net worth.
If you want to know whether you are on track towards achieving your financial goals, you need to know how much your net worth is at any given time. In case you don’t know what a net worth means, it’s the figure that is arrived at when you subtract your liabilities from your assets. Obviously, you want to have a positive figure here. If it’s a negative number, don’t despair. It only means that you have a lot of work ahead of you. The challenge is on working to make that a positive number.
8. See to it that you are paid what you’re worth.
It’s more than just self-confidence that should dictate this. Rather, look at official data from government sources like the US Bureau of Labor Statistics so you can determine what the salary range is for your job. Make sure that you also look into your company’s financials as well as what other companies in the same industry is giving to their employees. If you feel that you are being underpaid than what the rest of the industry is getting, perhaps it’s about time to ask your boss for that raise.
No related posts.
No related posts.