Seven Tips for Successful Financial Planning

When the new year began, one of your resolutions may have been to get your finances in better shape. It can be easy to get caught up in daily expenses and find yourself living paycheck-to-paycheck each month. Not only is this stressful, but it makes it hard to make a plan for your future.

Setting up a financial plan can help you to achieve the success you want to see today and in the coming years. Read on to discover some of the best tips for financial planning success and start making your money work harder for you.

1. Set SMART Goals

One of the first things you need to do to create a successful financial plan is to set solid goals. Of course, it’s hard to make a plan for success if you don’t know what success looks like for you. But setting the right goals is just as important if you want your plan to succeed.

It’s a good idea to set SMART goals for yourself when you’re making your financial plan. These goals are specific, measurable, attainable, relevant, and timely. A good SMART goal would be to have at least one year’s worth of salary in your retirement account by a specific date.

2. Evaluate Your Financial Situation

Once you know where you want to go, you need to know where you’re starting from. At the beginning of your personal financial planning process, you’ll need to sit down and take a hard look at your financial situation. Evaluating your assets is important, but it’s also a good idea to take stock of your debts and expenses at this time, too.

Start with the basics: your net household income, your basic monthly expenses, and any loans you have, including mortgages and car payments. From there, turn your attention to your major assets, including your house, your retirement accounts, any savings accounts, investment profiles, and so on. Finally, take stock of your debts, including student loans, credit card debt, business loans, etc.

3. Track Your Spending

The other thing you need to look at when you’re evaluating your financial situation is where your income is going. It can be easy to spend a few dollars here and a few dollars there and spend your way out of half your monthly paycheck. Spotting overspending patterns can be tricky if you’re not tracking your spending habits.

Get some financial planning software or an app that can help you categorize your spending every month. Look for areas where you could afford to cut back – things like dining out, impulse purchases, hobby expenses, or clothes shopping. This will also give you a better idea of how you need to arrange your budget each month.

4. Prioritize Saving

Now that you’ve got a clear picture of your financial situation, it will be time to start implementing some changes. If it isn’t already, saving should be one of your biggest financial priorities. Look for areas in your budget that you could cut back, and redirect that money into savings accounts.

If your bank allows it, set up automated savings transfers every month when your paycheck gets deposited. Putting that money aside can seem challenging, but if it’s gone before you notice it’s ever there, you’ll never miss it. It may also be a good idea to talk to a financial advisor about the best savings account options for you.

5. Set Up Passive Income Streams

It should come as no surprise that growing your income over time is one of the biggest keys to financial success. But unfortunately, most of us have a cap on how much we can expect to earn in our industries. That maximum may not be enough to continue growing your savings and retirement needs in the coming years.

Setting up streams of passive income can be a great way to grow your income without having to grow your workload. Things like real estate investments, stock portfolios, or even income from a website or ebook can be a great source of extra income. Talk to your financial advisor about the passive income options that will best meet your needs.

6. Max Out Retirement Matches

One of the perks many employers offer their staff is a retirement contribution match. This means that each month, they’ll contribute the same amount to your retirement fund that you do. Many employers have caps on these matches, usually up to about 3 percent of your overall annual salary.

If at all possible, you should contribute as much money to your retirement fund as your employer will match. This may require cutting back in some other areas, but failing to do this is leaving free money on the table. For nothing but the cost of the extra money you’re putting towards your retirement, you could be doubling your retirement savings every month.

7. Set Up An Emergency Fund

Retirement savings are important, of course, but they aren’t the only thing you need to be saving for. You never know when unexpected expenses may pop up, and these costs could knock a serious dent in your financial plan. An unexpected illness, a car crash, or an appliance malfunction could leave you fighting debt and struggling to get your savings back on track.

It’s a good idea to set up an emergency fund you can pull from for these sorts of expenses. If you don’t have any emergency savings, start working towards $1,000 in that account. Once you’ve reached that goal, try to save one month’s expenses, and then, eventually, three and then six months’ worth of expenses.

Learn More About Financial Planning

Financial planning can seem overwhelming when you first start looking at it. Begin with a hard look at your financial situation, including your spending habits, and set some SMART goals for yourself. Look for passive income options, make your retirement and savings a priority, and start putting money into an emergency fund for the rainy days.

If you’d like to learn more about financial planning, check out the rest of our site at Sara-Bay Financial Corporation. We are Sarasota investment advisors who provide independent and objective financial advice. Schedule a discovery call today and start creating a financial plan you can have confidence in.

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