This time of year I always seem to feel a bit frustrated at how my financial goals for the year didn’t quite come to fruition. Perhaps all that holiday spending doesn’t help matters! If you feel similarly, I hope today’s guest post will give you some inspiration for changes to make for a more prosperous 2020!
How to Establish a Successful Financial Plan
Careful planning is often the key to a good financial strategy. Unfortunately, a lot of people today use their money without thinking much about it. We buy the things that we want and need as we go through the month, then panic as the weeks go on and we realize that we’re going to struggle to make it through until our next payday.
Fortunately, if you’re ready to make a change for 2020, then setting up a strategy for financial success could be a lot easier than it seems. With the right financial plan, you can stop making decisions based on current impulses and fear and start thinking about what you want to accomplish with your money in the long-term.
Budgeting might not be everyone’s favorite thing, but it’s key to building your financial freedom. A working budget for each month will help you to see how every dollar you earn has a purpose, so you can avoid over-spending in any specific area. Budgets will put you back in control of your cash, so you can measure whether you’re actually reaching your goals or not.
Although a budget can seem like a lot of work at first, it’s actually easier to set up than you might think. All you really need to do is start by figuring out how much money you have going into and coming out of your bank account each month. From there, you can sort your cash into segments, including discretionary and mandatory spending.
Be Strategic with Debt
A solid financial plan is likely to include some kind of strategy for how you’re going to handle debt. After all, most of us can’t get through life without taking out some kind of loan eventually. For some people, this loan will be focused on their education and academic achievements. For other people, the most important loans they take out will be associated with their car and home.
While taking out a loan isn’t necessarily a bad thing, provided that you know you can pay back what you borrow, it’s important to have a plan for how you’re going to choose the right lending strategy. Figure out when borrowing from your credit card is a good idea, and when you need to look for more specialist lenders to help you.
Build an Emergency Fund
As soon as you start finding any extra cash for your savings, they should go into an emergency fund. Ultimately, an emergency fund is what you can rely on to keep you protected when the unexpected happens in your life. In an ideal world, we’d all have plenty of funds to keep us going if we should lose our job or have an emergency to handle. However, the truth is that we’re rarely prepared for everything that life has to throw at us.
Build an emergency fund that consists of around six months’ worth of the expenses that you’re going to need to keep living your everyday lifestyle. If possible, keep this fund in a separate bank account, so you’re not tempted to use it.
Invest in your Future
Being prepared with a solid financial plan isn’t just about saving as much cash as possible, you’ll also need to think about how you can build your savings over time too. Investing in assets and strategies that can build your wealth is a great way to put your money to work for you. Remember, you don’t necessarily need a lot of cash to start investing these days. You can get started with some low-price stocks and shares, and put more cash into your investments as you go.
If you’re brand-new to investing, you could even consider using one of the new apps or tools that allow you to round-up the cost of your expenses and put the extra money left into your investment budget. For instance, you might spend $12.00 and spend $3 on investing.
Adapt as You Go
Finally, remember that your budget needs to be strict, but it’s not necessarily set in stone. As your life and priorities continue to change, you’ll need to adapt your spending accordingly. Sit down with your budget at the end of each month and think about what you’re going to need to spend in the month ahead. If aspects of your incoming and outgoing money have changed, then add those factors to your budget and see where you end up. You might need to spend less or more in certain areas than usual to stick to your current goals.