Whether you’re just about to graduate from college, start building your career, enter married life, or raise your kids, you’ll want to be financially secure and retire at the earliest possible time.
However, what many people don’t realize is that they can’t achieve their financial goals without thorough financial planning. If you have a clear financial planning checklist, you can easily assess your current financial situation, make the necessary adjustments, and eventually gain financial security.
That is why in this article, we will talk about the importance of taking control of personal finances and give you a checklist to help make the process easier, smoother, and less stressful for you.
If you want to realize your life goals, you need a step-by-step process called financial planning. This guides you in managing your finances well, overcoming the possible financial challenges along the way, and finally making your personal goals and dreams come true.
As Benjamin Franklin said, “If you fail to plan, you are planning to fail.” Your personal finances are no exception.
Some of the most common instances where you need careful financial planning include:
Financial planning also means considering all factors, including the following:
To help review your finances easily, take control of them, and stay in line with your goals, following the financial planning checklist below is necessary:
The key to setting financial goals successfully is being realistic. Identify your short-term, mid-term, and long-term goals.
Everyone has different circumstances. Take your time and be flexible enough in establishing your short-term, mid-term, and long-term financial goals.
Effective financial planning involves managing both different types of debt, including short-term and long-term ones. A significantly lower credit card balance that can be settled within one year and a car loan that’s payable within three years are considered short-term debts.
Meanwhile, student loans and mortgages that you can pay off after 10 or 30 years are what you call long-term debts. It’s generally a good idea to focus on paying off debts with higher interest rates.
Paying only the minimum amount per month will lead to longer years of carrying the burden and suffering from the huge interest.
Major life decisions like taking a new career path, building your own family, raising kids, and purchasing your first home need to be planned well, so you and your family will have a comfortable life.
Sometimes, unfortunate things happen, like losing a family member from an accident or serious medical condition or getting laid off because of company downsizing. To help you prepare financially for these types of challenges, ask yourself these questions:
Your financial planning checklist wouldn’t be complete without talking about retirement. Start planning and saving for it as early as possible to maximize the benefits of compounding interest and cultivate your investments.
Then, consider the following:
By reviewing your retirement savings plans and assessing the market condition, you can determine your risk tolerance, apply the necessary changes whether that includes your lifestyle, and stay on track with your goals.
According to a Federal Reserve report, about a quarter of adults in the U.S. do not have retirement savings. However, don't be dissuaded; it's never too late to start saving for retirement.
Did you know that over 25% of Americans do not have an emergency fund? If there’s one thing these trying times have taught us, it’s that nothing is permanent, and you have to save for rainy days.
Strive to build three to six months’ worth of emergency funds. This will give you peace of mind knowing that you and your family can get by for several months in case you suddenly lose your job or encounter emergencies.
To build your emergency fund, compute your living expenses. These include your groceries, monthly mortgage payment, and utility bills.
You can start with small but regular contributions using a separate account. Then, increase the amount gradually and automate your savings, so you won’t miss it or be tempted to withdraw the amount.
Doing an annual check of the different aspects of your financial situation helps you determine where you are and what kinds of adjustments you have to make.
These include your insurance coverage, investments, retirement accounts, and credit report and score.
If you’ve had big milestones like getting married or having a baby, reviewing your insurance coverage is necessary.
Even if you may be in a good financial situation today, you still need to explore different insurance policies that will address various elements in your life, including:
If you only have automobile or health insurance at the moment, secure your future with your family by getting these kinds of financial protection. Regularly review your beneficiaries as well to avoid potential disputes or other legal issues.
Investments help you build a better future for yourself and your family. Make sure to perform an annual review of several other investments, like bonds, stocks, mutual funds, and real estate.
Revisit your retirement portfolio as well to see whether the current economic markets match your risk tolerance level. By reviewing your investments, you can easily identify what changes need to be made to fulfill your financial goals.
Need expert advice when it comes to your investments? At 121 Financial, we offer our members complimentary financial planning based on varying needs to help you reach financial security as early as possible.
If you check your credit report and score, you can easily spot any inaccurate information and prevent any suspicious activities in your account. You can understand your credit position too!
Credit reporting agencies like Experian, TransUnion, and Equifax allow you to get an annual credit report for free. You may also get your credit score from your credit card company.
While an 800 credit score is exceptional, a 300 credit score means very poor. If you have a high credit utilization ratio, expect a low credit score or the amount that you owe divided by your total credit limit.
Achieving economic stability starts with careful financial planning. You need to follow a financial planning checklist to keep track of your finances and see what you have or haven’t achieved.
Start by setting your financial goals. Then, manage your debts, prioritize your family, plan for your retirement, and don’t forget to build an emergency fund.
Conduct an annual review of your investments, insurance, and other financial information too, so that you’ll know if they still fit your goals.
If you want to ensure you’re on the right track with your investments and financial planning, 121 Financial Credit Union is here to help.
Contact us today to see how our programs and services can help you achieve your financial goals!