By diligently minimizing your spending to essential expenses and / or maximizing your income in order to reach and go above the essential level, you will begin making headway. Read on the article“ How to make a budget without a budget”.
What now?
Having done your inventory and determined your minimum financial level, you can have a better idea of your leftover money in order list your prioritized objectives. Where do you start? Should you pay off your loan? Or save into a retirement account? Open a savings account for a down payment for a home? Increase your emergency fund? With so many needs and not enough money, what is one to do?
At this point, the“ growing-up blues” set in. Relax and be not anxious – no matter what happens, as long as you make reasonable choices, the road will lead you home.
Categorizing Financial Goals
There are four major categories of financial goals: � Emergency savings � Loan payment � Short / Medium-term savings � Long-term / Retirement savings
Most experts recommend funding all of these goal categories, aside from covering your monthly costs, and assigning bigger income portions to your highly-favored goals. However, rarely do things work your way and your limited income may require you to choose one or two financial goal categories above the rest.
Oftentimes, the two most crucial are emergency savings and loan payment. Providing yourself a safety net at a minimum of $ 1,000 is the first on your list( although the target amount should be enough to cover your living expenses for about 6 months). With your 1k emergency fund, proceed by distributing your money accordingly for emergency savings contributions and loan payment. You may also want to insert a tiny amount for your retirement savings into the picture-- this could be as small as $ 50 monthly – which is good enough for a lowinterest debt.
Also, remember to contribute to short and medium-term fund savings. For young professionals, you have enough time before you reach 59½ to set aside some money for your lifelong dreams, whether a dream house, raising a family, travel, etc. That refers to money apart from your retirement nest egg or emergencies funds.
However, if your budget will not allow you to contribute to all savings categories, your best solution is to seek ways to increase your income. Saving money and reducing your daily expenses can only do so much. Your ability to earn more has practically no limit whatsoever; and having the flexibility and freedom that greater earnings provide will further enhance your financial and life aspirations. Financial experts will attest to this fact.
Financial Planning for Novices Review � Assess your financial situation � Set your goals � Make a budget and surpass your minimum cost of living � Prioritize your objectives and set aside surplus money from your living cost � Enhance your income generation for funding higher targets � Relax and enjoy your accomplishments
Breaking it down to the barest components, novices can do effective financial planning using a few essential, practical steps, namely: earn more money, reduce expenses and set aside extra money consistent with your highest goals.
Following these vital tips is your best weapon against the onset of“ growing-up blues”.