Having a financial plan is about more than figuring out how much of your paycheck is left after the bills are paid. It’s about having a clear idea of where you want to go and then making a plan to get there. Creating a budget is a key part of any financial plan and will help you achieve your goals.
Save for the short term
One of your top priorities should be building up your emergency savings.
Choose a reasonable rent or mortgage payment
Include all fixed costs, and consider what amount you really want to pay
- Just because a lender approves you for a certain home loan amount does not mean that amount is ideal for your budget
- Make a list of features you “need” and ones that are “nice to have” so you can make a thoughtful and financially sound decision
Treat yourself
Studies have shown that willpower is a limited resource – you can only resist so many temptations before you will give in.
- When considering how to manage money, the most savvy financial minds will tell you that you have to make room for indulgence in the budget to stay on track.
Invest for the long term
Consider putting your money in something other than a standard savings account that has tax benefits.
- The most popular accounts that can allow your money to grow tax-free until you are older are 401(k)s and Individual Retirement Accounts (IRAs).
- Start saving as much as you can as early as possible to maximize the compound interest.
Never stop learning.
Stay financially secure by taking stock of what you already understand, and then build on that with books, classes, or savings advice from a professional. Before you know it, you’ll be sharing your expertise on how to manage money effectively with friends and family.
Use credit wisely
Pay attention to the ratio of how much debt you currently have to how much you can borrow.
