The new year is here, and now is the time to create financial goals to help you get on track and set yourself up for a more financially stable future. Sometimes, getting your finances organized can be a daunting task, but by setting a few yearly goals, it can be easier than you think. Start the year off right by getting started on the five financial goals listed below.
1. Draft a Monthly Budget
Even though this may seem like a common goal, many people find it hard to complete this task each month and stick to it. A monthly budget is the beginning of gaining better control of your finances, and the more detailed it is, the better. When creating your budget, make sure that every penny is accounted for, including savings, investments, clothing, food, entertainment, etc. It will not only help you realize how much you spend each month, but it will also help direct your focus to areas where you can improve and goals you can set for the extra money you may have when sticking to your budget.
2. Take Control of Your Debt
Debt can be one of the primary factors that can hold you back from financial success. Make a reasonable plan to reduce your debt and stick to it. You can start by determining a reasonable amount of debt that you would like to reduce for the year, making sure that the goal is attainable. Next, determine how much you will need to pay each month in order to reduce your debt by the goal amount. Finally, you will need to look at your budget and find a way to fit in this amount each month, even if it means cutting back on other areas of the budget. It is also important to make sure that you do not add any more debt throughout the year. With interest rates rising, reviewing your debt with the highest interest rates and focusing on that can help to lower the total interest costs you pay.
3. Make an Emergency Fund a Priority
Medical costs, major vehicle repairs, job layoffs, or house maintenance can quickly derail a budget. Make sure that you have a fund set up specifically to handle these unforeseen expenses, so you don't have to alter your monthly budget to accommodate. A good rule of thumb for an emergency fund is to start with a month’s income plus $1,000. Once this goal is achieved, you should keep saving until you have about six months of expenses. Set aside an amount each month in your budget to add to your emergency fund. If you need to use it for an emergency during the year, you will need to regrow it. Also, with savings accounts now paying higher interest, it can pay to shop around for the best places to park your money.
4. Prioritize Retirement Savings
Saving for retirement is something often put on the back burner until it is too late. The sooner you begin saving for retirement, the more time it will have to grow, and the better return you will have on your investment. Work with your financial advisor to determine what retirement savings vehicles may be best for you. The beginning of the year is also a good time to review your overall risk levels in your accounts to make sure they are consistent with your goals and objectives for long-term success.
5. Create a Long-Term Financial Plan
Goals can be more difficult to set if you are having difficulty envisioning the rewards that will come with financial stability. Consider any long-term financial goals you may have, such as buying a house or retirement. Draft out a plan that includes savings, investing, and other ways to build the wealth you need to achieve these goals. You can start with smaller goals, so they seem less daunting. Having a plan in place will help you stay on track and guide your financial decisions.
Make this the year you take control of your finances and get on the right track to achieving your future goals. Consider the five financial goals listed above to help you get started and consider working with a financial professional that can help ensure you are on the right path.
Jeff Spitzmiller is the CEO of Ohana Wealth & Life Planning based in Cincinnati, OH. Ohana specializes in life and financial planning along with ESG (Environmental, Social, Governance) investing principles for professionals in the healthcare and university fields. The firm is an independent financial advisor and a fee-only fiduciary. Jeff and the firm also enjoy volunteering and giving back to the local community. You can reach Jeff at firstname.lastname@example.org.
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