![]() Defined contribution plans like 401(k) and 403(b) plans put the onus on the employee to save, but often incorporate a partial employer match of contributions. If your employer sponsors a retirement plan, take the time to understand it and maximize the benefits to the greatest possible degree. Even lacking a comprehensive financial plan, the best move you can make is to get out of debt. Don't assume those student loans will be forgiven they probably won't. ![]() Focus especially on the costliest obligations like any credit card balances or consumer loans, and keep banging away at student debt. This process should help understand how much discretionary income you have left for saving and investing and where you should consider prioritizing or eliminating if necessary to reach your goals.Įvaluate debt. Too much debt is often the biggest obstacle to attaining financial security, and paying down high-interest loans should be a top priority. Start working on a budget. Initially, this involves carefully documenting everything you spend for a couple of months and writing down fixed expenditures to compare against income. If you're just getting started, it may be negative until you build more wealth and retire obligations. The difference between assets and debts is your current net worth. Next, create a personal financial statement listing all your assets (the things you own), alongside your liabilities (what you owe). Try to quantify as best you can, and at this stage don't worry too much about feasibility as you will come back and adjust later. Identify your main objectives like retirement, college funding, charitable objectives, and quality of life. The first step in a journey is to identify the destination, including any planned stops along the way. Whether you choose to do it yourself or hire an expert, you will need to focus on these topics and perhaps make some difficult choices to take control of your financial direction. It is useful to decompose the process into a few broad elements that professionals apply to financial planning. ![]() ![]() But even if you are not ready or willing to engage a professional, there are steps you can take to help assure that you are heading in the right direction until your situation demands a more comprehensive analysis. The process of developing a comprehensive financial plan can seem a bit intimidating, and there are many competent experts available to provide guidance and assist in the preparation and implementation of a long-term plan. Yet there is wisdom in the notion that success in financial affairs as in life is intimately connected with planning and preparation. "By failing to plan, you are planning to fail." This pithy aphorism from Ben Franklin has been borrowed by the likes of Winston Churchill and regurgitated by thousands of financial planners in the years since. ![]()
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