Sit back, relax and imagine your financial dreams. Chances are, you’ve a general idea about where you want to be. Yet, try turning those dreams into reality, and suddenly the path is shrouded in mystery. Is it because your goals for financial stability are too broad? Are you too focused on the end result?
[Elissa Tuttle is a financial planner at COUNTRY Financial]
Anyone who knows me would say I’m a “numbers person.” But, even I get bogged down in the specifics of creating a plan. How much should I save? What rate of return can I get? If you’re drowning in details, here are a few tips to help you take those first steps towards realizing your financial goals.
Bring your future into focus
The first step in the process is deciding what you want to achieve and then breaking down your goals into specific buckets, like short- and long-term. Don’t worry about the numbers yet. You can add them later. For now, focus on defining what your “future state” looks like. For example:
- Short-term: pay off your car loan, or save for the annual family vacation.
- Long-term: travel during retirement, or leave a legacy to your favorite charity.
Giving shape to your plan
Let financial “rules of thumb” be your springboard. If you’re wondering what your end savings goal should be, start with rules like “have a three to six month emergency fund” and “expect to need 75 percent of your pre-retirement income in retirement.” At a bare minimum use guidelines like these to put something in place. In terms of monthly savings, the rule of “saving 10 percent of your income” is a good starting point.
This is great general advice, but as you work on your plan, it must get more specific. For example, think about how your standard of living would change if you experienced the untimely death of a family member or had to tap into your emergency fund to repair a leaky roof.
Making your contribution
You have a plan and savings goals, but if you don’t think you have enough “extra income” to set aside, think again! Shaving a few bucks off your monthly budget can really add up. If you save $50 per month, in 5 years you’ll have $3,000 (not including interest or growth) or $12,000 if you can save $200 per month.
How’s the state of your plan? Are you meeting your financial goals so far this year?
I have to say: “I’m continuing working toward my goal to pay off some outstanding bills that I have.” I have been truly blessed by one of my friend to set-up spreadsheet to show all my bills that I pay each month. By doing this I can keept track of what I pay out, and I can work toward putting more money on the high interest’s bill first. This has truly helped me and I hope this could help others to keep track of what money’s being spent out each month.
Patricia Harris
Cotton States
Office Services
The biggest thing is to have a plan! I am constantly amazed by the people I meet with in their 40s and 50s who have no plan whatsoever. Sit down, come up with a plan and execute it!
Great advice, Elissa!