It’s a new year, which means that it may be time for a new financial plan. Make 2020 your year to start saving for your goals. The best way to do that is to start off the year with a strong financial plan. Here are the first steps to take in creating your plan!
Step 1: Find Out Where Your Money is Going Now
To do this, get a notebook or a financial planning app and write down every time you spend money on something. Make sure to record how much you are spending and what it is specifically. Then, at the end of the week, total all those numbers up and put them in the categories: food, travel, housing, clothing, entertainment, healthcare, rent, mortgage, utilities, and other. We recommend doing this for about 3 months to get a good picture of common themes. This process is extremely important to create a realistic financial plan with fairly accurate estimates of monthly expenditures.
Step 2: Set Financial Goals
It is important to make SMART goals. These goals are specific, measurable, attainable, realistic, and time-bound. An example of a SMART goal is “I want to save $10,000 by December 2020 to start my own business”. It’s crucial to make these goals specific and attainable to accomplish them!
Step 3: Start an Emergency Fund
Often times, people ignore the fact that emergencies are bound to happen. It is a good idea to also set aside money for emergencies. You want to make sure you are prepared to weather a storm. Otherwise, you could face getting yourself into some extra debt.
Step 4: Get Insurance
After working hard to earn your money, the last thing you want is an unplanned occurrence to disrupt your financial plan. Insurance is your back-up plan that will protect your assets if something happens when you need a large amount of money to resolve it. Your insurance coverage should include health, auto, disability, life, home or rental, and business.
Step 5: Start Saving
The key to a successful savings plan is not increasing your income. The key is to decrease your total expenses. This means being mindful of your outgoing money, not just your paycheck. After looking at your list of expenditures, determine where you might be spending too much. Look for ways to save here and there, but don’t be too harsh on yourself. Your goal is not to eliminate guilty pleasures. Rather you should try to control them so that you can free up some extra cash! A realistic goal would be to try to save 10% of your monthly income.
Step 6: Review Your Plan Frequently
Once you have your financial plan outlined and you have begun chugging along, it’s important to review your plan and make any necessary adjustments if your goals or the circumstances around your life change. If you check infrequently, it’s harder for you to deal with unplanned life occurrences, bounce back from setbacks and accomplish your financial goals.
Step 7: Stick With it
Your journey to financial independence won’t always be easy. Pursuing a goal of financial independence is not always fun, but it’s completely achievable. Remember to have a solid plan for your finances, be disciplined and avoid overspending. You’ll feel great when you really make a constant effort to stick to your budget.
We’re Here to Help!
We know that financial planning can be difficult and knowing where to start can be hard. All of our Points West Bankers are here to help you with your financial plan and help you stay on track throughout the year! Contact us today to get started on your 2020 financial plan!