Should Know About A Financial Planning Checklist

While everybody’s financial situation is different, there are some options and strategies that can be used by all to get on the right financial path.

Financial Fundamentals
Develop a budget and stick with it: When making a budget it is important to develop a realistic one and stick with it. You need to decide how much you can afford to spend and what you should be saving each month. To be financially independent, it is important to start making wise choices early on in order to develop a habit of staying within your budget.

Figure out your credit score: Do you know what your credit score is and how much it can affect you in various areas of your life? How do you build credit in a responsible way to make sure there are no surprises down the road? There are ways for you to check your credit score. Visit one of the three reporting agencies for more information.

Money Saving Tips
Employee benefits: What benefits do you currently have and what benefits are offered at your job? Are you contributing enough to your retirement plan to get the full employer match? What other savings can you get by participating in the other benefits offered to you? Speak to your human resources department to make sure you understand all the benefits available to you.

Emergency fund: Do you currently have an emergency fund? Have you thought about what would happen if your car broke down tomorrow? What if it was something bigger? Most financial professionals recommend three to six months of your monthly expenses to be saved in a liquid account that you can access when you need it.

Pay back loans: When creating a budget, make sure you include any loans that you currently have. When looking at the amount to pay each month try to allocate a slightly higher amount than the required minimum payments. This could possibly save you money by lowering the amount of interest you could be paying.

Set up a savings account(s): Do you have a large purchase in your future? Think about setting up a separate savings account to start saving for any dreams or goals you might have. This helps to separate your money so you can see the progress you are making towards your purchase without tapping into your emergency fund. This can be beneficial if you are looking at purchasing a house as you will most likely need a down payment. (For related reading, see: 10 Ways to Effectively Save for the Future.)

Establish relationships with various insurance and financial professionals: In your 20s it is important to start developing these relationships because you will need various types of insurance and guidance to help you manage the risk that will be encountering on your own. Insurance professionals will ensure you and your possessions are covered, while a financial professional will help you with various financial strategies to help you achieve financial independence.

Set Long-Term Financial Goals
Start saving for retirement: Retirement might seem like a long way away, but it is never too early to start looking at the various retirement options you have. Taking part in the retirement options you have at work are a great start but for some people, it might make sense to look at alternative investments outside of work, such as a traditional IRA. If you qualify based on your income, a Roth IRA can be a great way to start saving for retirement outside of the workplace because it offers tax-free withdrawals during retirement.* You should talk to your financial professional about the different options that are available.

Develop goals and write them down: In your 20s everything can be changing so fast that you don’t know where to start. A great thing to do is sit down and start coming up with some goals. Break these down into short, mid and long-term goals. This helps by giving you some direction in your life. Focus on your goals and make sure what you are doing every day is keeping you on the right track to achieve them. (For more, see: Want to Be Financially Fit in 2017? Use These Tips.)

Guidelines to Achieve Success
Consider saving 30% of your income: This might seem like a lot starting out, but it is important to save for the various aspects of your life. Consider saving 10% for retirement, 10% towards your emergency fund and 10% towards any large purchases you might have coming up.

Have an emergency fund: It is extremely important to set up your emergency fund and not touch it unless needed for an emergency. This fund will help give you the peace of mind that if something were to happen, you can take care of yourself. Try to get six months of your living expenses saved up.

Minimize credit card debt: Credit cards can have high interest rates that can really cost you a lot of money in the long term. Try to pay off your credit cards every month or, if you have to carry a balance, try to keep it under your credit limit.

Buying a vehicle: When buying a car consider putting down a significant down payment. When financing the car consider doing so for no more than four years and spending no more than 10% of your gross income on car payments. If you are buying a new car, consider driving it for 10 years to maximize the car’s value and to limit the loss due to depreciation.

Buying a home: Like buying a car, put down at least 20% as a down payment on a new home. This will help you to lower the monthly mortgage cost, help your chances of getting a favorable loan and also make sure you don’t spend more on your home than you can afford. Some financial professionals will advise you to keep the total cost of your home under two or three year’s worth of annual income.