Financial planning should take into account your short, mid, and long term goals. It's a thorough evaluation of your current, estimated, and desired financial picture. In a way, when you start building a financial plan, you're also creating a life plan. It will consider major purchases, events, births, education, vacations, retirement, and, eventually, death. The path may seem linear at first, but there are always unexpected twists and turns. Everyone has different financial goals and expectations, but choosing a lifestyle that helps achieve them is an important factor.
Let's review some lifestyle management tips to help achieve your financial goals.
Building wealth is not just about how much you save, but also how much you spend. Breaking down monthly and yearly expenditures can give you a clear picture of your household budget and its pitfalls. Frequently the results will be eye-opening. We're spending how much on what!? This exercise of visualizing incoming and outgoing money can help you and other family members involved, pinpoint whether the choices support your financial plan, or hinder it. It can also make you aware of opportunities to save or invest more by reducing costs or paying down your higher-interest debt. A small shift in your mindset and priorities now could lead to greater wealth down the line.
Plan and Prepare
We all work hard for the money we earn. Borrowed money, whether a loan from a bank or a swipe of a credit card, can be a burden on your finances. Living within your means while saving and investing a predetermined amount each month is central to wealth management. But a plan only works when it's followed. Automate the allocation process by setting up automatic contributions each month, so you never have to second guess how much you've invested.
But like returns on investments, today cannot be guaranteed tomorrow; the income you're earning today cannot be guaranteed either. A gap in employment is not unusual. A stable emergency fund with up to six months' salary saved will provide a cushion should the unexpected happen. Don't shy away from the fact that circumstances can change.
Save more than you splurge.
Regardless of your age or status, living within your means and investing as much as you can is fundamental for financial planning. When it does come time to "splurge," strategize on what it will take to afford it and put a set amount of money aside. For a big vacation instead of renting an expensive car for a week, consider using ride-sharing services. Instead of renting a hotel room on the beach, find a comfy home rental a few blocks away using a marketplace . In today's digital economy, there are a "wealth" of options for the strategic saver.
If you're an empty nester, close to retirement, or already retired, downsizing your home is a cost-effective way to free up capital and lower (or eliminate) monthly payments. The money saved can be used to bolster your wealth management strategy and income-producing investments.
There are no quick pay-offs or magic wands when it comes to financial planning (although sometimes we wish there were). It's a long-term process that requires dedication, reflection, and guidance. It can be hard to rationalize what we need versus what we want. The things we spend money on feel very personal and can sometimes cloud our better judgment. It takes a dedicated financial advisor who can keep you accountable while still understanding that the best thing about money is the quality of life it affords you.