According to Crediful, it's essential to be as specific about your goals as possible if you’re to achieve them. 'I want to own my own home in 10 years' is far better than 'I want to own my own home.' A definite, realistic timeframe to work with will help you achieve your goals. However don't forget to set short-term goals. For instance, paying off credit card debt or moving to a more affordable apartment are short term goals that will make your long term ones more achievable. It's also a great way to keep yourself motivated.
Cut back on your expenses
Once you've set your goals, make sure your money is going to the right places. Set yourself a budget. Your cash outflows should be less than your inflows. Or you won’t have the extra cash for your saving plan, even if you have a high income. A budget could be as simple as a list on paper, a budgeting app or a spreadsheet. All of them will get the job done. Prioritize expenses like food and housing. Rank everything in terms of importance. Reduce your spending as much as you can. The more surplus cash to save the better. Do you need three online video streaming subscriptions? Would it be cheaper to cook for yourself than to eat out? Asking yourself these candid questions will reveal what's truly important and what isn't.
Reduce your debt
The next step is reducing your debt, especially if they’re high-interest debts like credit card balances or title loans. If you don't, you may find yourself paying up to three times the initial debt. On top of that, bad debt will mess with your credit score which is arguably one of the best means of building wealth. A good credit rating grants you access to low-interest rates on loans, higher limits, more negotiating power, better car insurance rates, and a slew of other benefits.
Don't forget about retirement
When you're young, retirement feels ages away. But that mentality can deprive you of the fantastic benefits of compound interest. Let's say you earn $30,000 with a 4% annual raise, and you put 4% of your salary into a retirement account with an 8% yearly return. If you're planning on retiring in 30 years and you start saving now, you'll have $220,944 when you retire. But if you start saving five years from now, you'll have $164,878. If you have an employer-sponsored 401(k), we advise you to take full advantage of it. There are also individual retirement accounts for the self-employed, and they too allow for tax deductions, credits and in some cases, tax-free earnings.
Conclusion
The only way your financial plan will work is if you’re proactive and consistent. Stick to your budget and make sure to review and adjust it as your finances and life circumstances change. Do you have any questions about financial planning? We would love to hear in the comments.