Balancing immediate wants and long-term goals is one of the biggest challenges people face in financial planning. Often, the immediate moment feels too important to ignore. Emergencies also lead to countless setbacks when trying to save money. However, you can find the perfect balance between shopping for groceries and the ideal retirement savings plan. Here is a four-step guideline to help you achieve better financial planning.
Have One Goal Per Year
One of the huge mistakes people make is planning for more than they can achieve within a short time. For example, getting a mortgage and two car loans within the same financial year will stress you out and possibly lead to you abandoning both goals. Instead, create a plan with one goal per year. You can choose to save for a new car as your goal. With the single goal in mind, you can assess your money habits and find ways to minimize unnecessary buying. You can also classify goals into short-term, medium and long-term.
Create A Budget
It will be simpler to come up with a budget when you already have short- and long-term goals. When creating the budget, assess your monthly cash flow and needs. List down all bills that you must pay monthly or the fixed expenses. These include housing, health care, transportation and debt obligations. You can set aside a certain percentage of your income as an emergency fund. You can have a budgeting worksheet to list your needs and the amount of money you have allocated. The spreadsheet helps you avoid overspending.
Build An Emergency Fund
One of the reasons people's financial planning attempts fail is when they cannot adequately plan for emergencies. You should always set aside some funds for instances where life might throw you a curveball. For example, you might get into a minor accident at any time. An emerging fund ensures you can repair the vehicle and later claim the money from your car insurance provider. Other emergencies include dental health issues, funeral expenses and unanticipated travel.
Secure Your Sunset Years
You should also find ways to secure both your present and future. Have affordable insurance for your home, cars and health. Start saving for retirement and college funds. Also, invest in projects that secure your retirement.
These four guidelines can help you adequately plan for your future. You should also consult a financial planning professional to guide you through these processes. They will help you work hard and secure your future.