With so many of us falling into the trap of immediate self-gratification, we often neglect the financial planning that’s needed for our future. And as Scott Langdon from MoneyTaskForce.com says, “if you fail to plan for your financial future, you’re basically planning to fail. And we all know that the consequences of poor financial planning can be very catastrophic.”
Although some of it is due to a lack of financial literacy, part of it is due to just making poor financial choices early on in our lives. That combined with things like being a victim of downsizing and the recession in general, you will need additional time and money to recover from these major financial setbacks. That’s why we’ve provided some information below that can guide you through some critical steps to plan for your financial future
1. Map Out Your Overall Desired Lifestyle for the Future
Planning for your financial future will be ineffective if you don’t first determine what your overall desired lifestyle looks like. For example, how many children do you plan to have in the future? Do you plan to be married and have a two-income household or just one? How many sources of income are you planning to have in general? Do you plan to live in the suburbs or in a metropolitan or urban area? And here’s the real kicker, at what age do you plan to retire? All of these factors have a direct impact on how much it’s going to take to achieve and maintain your desired future lifestyle.
2. Create a Financial Plan for Your Future Lifestyle
After determining the future lifestyle that you’d like as indicated in step one, the next thing to do is determine how much it will cost to achieve and maintain that lifestyle. For example, if you plan to live in a large home by the time you retire, are you going to plan to have your home paid off before or after you retire? That will determine how much money you will need to cover your monthly expenses.
Going through this exercise will not only help you to be realistic about what you plan to achieve, but it also allows you to take the proper steps that will lead you there. It will basically help you better plan to sustain the lifestyle that you’ve always dreamed of.
3. Estimate the Monthly Cost to Maintain Your Future Lifestyle
Riding on the heels of steps one and two, you also need to not only plan what your monthly expenses will likely be in the future, but you also need to plan for the cost associated with how you plan to live your future life. For example, if you plan to take more vacations in the future than you’re taking right now, then you’ll need to plan to set aside extra money for that.
Additionally, as you get older, you’ll likely develop various health conditions that may require medical attention. So there will likely be additional medical expenses in the future than you have today as well. Additionally, if you plan to have a large family, you may also need to consider things such as college tuition, and so forth.
4. Set and Stick to a Budget
Although many people cringe when it comes to setting a budget, often a budget involves controlling and becoming more aware of what you need to do with your money. Budgeting is more intentional spending as opposed to aimless spending. It allows you to set financial priorities that are consistent with your overall future financial plan.
5. Set Short-Term and Long-Term Goals
Although your future plans may not happen for some years, it’s important to set short-term and long-term goals that you can implement along the way. Otherwise achieving your future financial goals will simply be left up to chance, which means that they may or may not happen as planned. According to Investopedia, studies show that individuals who plan for the future acquire more wealth than those who do not plan for the future.
The important thing about setting goals is being able to determine how close you are to reaching your goals and whether or not you’re on track. If you’re not on track, then you can take the necessary steps to get back on track before you stray too far away. Without having a goal in place it’s difficult to measure your performance.
6. Determine How Much You Need to Save on a Monthly Basis
Armed with the proper information that is needed to reach your future lifestyle, you can now determine how much money you need to save each month and how long it will take to get there.
Alternatively, you can also consider other income sources to help supplement your income after you retire. For example, if you were to write books or invest in real estate then rent your property, you can generate an additional cash flow every month to supplement your income.
7. Seek Investment and Financial Advisement
If you plan to invest in real estate or make other investments, be sure to seek out the advice from an experienced financial advisor prior to making any final financial decisions. You’ll want to not only ask the financial advisor about what type of return you can expect but also about the risk involved with each investment product as well.
8. Began Making Sound Investments and Monitor Them Regularly
After you’ve had a consultation from an experienced financial advisor, now you can begin making sound investment decisions that will help you reach your financial goals. During this process, you may discover that some of your investments may not work as you planned, which means you may need to go in a different direction and make changes to your investment decisions accordingly.
To conclude, we certainly understand how challenging it is to save to meet current financial needs, not to mention your future ones. However, with proper forethought and implementation, hopefully, you can begin implementing the eight tips provided above to better control the outcome of your financial future.