Did you know that a quarter of Americans have no emergency savings?
In today’s tough economy, it’s hard to cover your current expenses, let alone plan for the future. How do you cover today’s needs while also planning for tomorrow?
Building a personal financial roadmap can help. Clearly understanding your current financial situation helps you to prepare for the future in a way that leaves you feeling empowered rather than distressed. Keep reading to learn how.
1. Track Expenses
The first step in creating a roadmap that works for you is to understand your current financial situation. If you aren’t currently tracking your spending, you’re likely making financial choices based on instinct rather than data.
Monitor and write out everything you spend money on. Ideally, this process would take about three months so that you can capture one-off expenses and any bills that you pay on a quarterly basis.
2. Build a Budget
Next, use your current spending information to build a monthly budget that you can stick to. Ensure that your monthly expenses are less than your monthly income.
Some expenses, like your rent/mortgage and insurance payments, are fixed expenses. Others, like entertainment or eating out, are variable. If you need to cut down on expenses, target your variable expenses first to see if there are areas where you can cut back.
3. Identify Your Goals
Once you have your current financial situation settled, it’s time to start making financial goals for the future. Do you want to save a certain amount for the future? Looking to retire early and travel the world?
Having a meaningful “why” attached to your financial goals will make it easier to stick with your plan in the long run.
4. Planning for the Future
After clearly defining your long-term goals, create a step-by-step plan to help you achieve the financial future you envision. It should be specific to your goals and informed by your personal finances.
For example, if your goal is to build up an emergency savings fund, your plan will involve finding money to set aside on a weekly or monthly basis to put in that fund.
On the other hand, if you want to buy a house but don’t have the credit score you need to get a loan, your plan will be more heavily focused on paying down debt than building up a savings fund. (If this sounds like you, resources like insidecreditrepair.com can help you get started.)
5. Work the Plan
Once your plan is in place, the only thing that’s left to do is to implement it! Work toward your goals every day. Small behaviors over time can add up to big results.
Build time into your schedule to re-evaluate your plan on at least an annual basis. It’s okay for your goals to change; just make sure that your plan still supports your new dreams.
Make Your Financial Roadmap Work for You
Now you have five steps for creating a financial roadmap to help you achieve your dreams. Analyze your current finances, build some goals, and create a plan. Follow these steps, and you’re sure to achieve your financial dreams!
Looking for more advice on organizing your personal finances? Take a look at the other articles in our finance section for more tips!