We all have big financial aspirations, but making them into a reality is often the problem. How do you put those plans into action?
Here are a few tips to help you achieve financial success.
Evaluate your financial status
Each person has a different financial situation. Being able to identify your financial status can help set your plans on an easier path. For example, if you do not have savings you need to figure out how to optimize your current income to start saving.
Clearly state your goals
When it comes to money, you really cannot “wing it”. Your goals and plans have to be clearly stated so they become actionable. “Spending less” and “saving more” are good phrases to start with, but they are not quantifiable. Set a percentage, for example five percent of your salary goes to an emergency fund. 10 to 15 percent goes to savings. Also, while it’s important to set parameters, remember to be realistic.
Set a goal time frame
As much as you might like it, you will not be able to achieve your goals in one go. So you have to set realistic time frames so you can prioritize certain goals. This also assures that you will have sufficient funds as you achieve them, and since a few goals, at a certain point, may overlap. Breakdown your goals into three sets:
- Short term goals. These are goals set in the immediate future, like six months to a year. This may include an emergency fund or some money for an annual vacation.
- Medium term goals. These are the goals set on the three to five year time frame. This may include paying off certain loans. Down payment for a house or investment.
- Long term goals. These are goals which may take around 10-15 years or even more. Typically, this includes the education of kids and a person’s retirement.
Find a way to get there
Now, here comes the hard part-how to achieve your plans. Strategy is important here. Set a budget. A fixed amount of money you will allot for certain things: savings, emergency funds, bills, food and other necessities. Stick with it. Though it may be hard at first, the system will let you adjust and eventually get into the groove of things.
If you have debts to pay, you may want to prioritize that first, but keep saving and investments on the side, even at a minimum. The logic here is that once you become debt-free, financial flexibility comes in.
If you want to add a secondary source of finances, check if set up will indeed benefit you. You don’t want to overwork yourself and end up using the extra money just to pay for hospital bills.
Measure your progress
Constantly review your progress to check if you are on the right course in achieving your goals. Remember that while you may have a system in place, nothing is completely set in stone. Maybe you will finish your debt earlier, use the extra to fund an investment to add to your savings. A promotion, a bonus or a windfall isn’t far-fetched in the future. Use these unexpected sources of income wisely.