Budget for the Future: Planning Tomorrow’s Finances Today
Money – your best friend and worst headache. It’s easy to see it as a utility, taking in so much and spending so much, but this outlook can lead to issues down the road. Creating a steady map for your family’s finances will establish a healthy and successful enterprise.
Follow these tactics to ensure your finances life and cut out the headaches.
Set Clear Goals for Your Finances for the Years
“Where do you see yourself in five years?” This is typical question that can also apply to your finances. Set clear goals for one, five, and ten years to anticipate large expenses or equitable goals. Whether it’s a new home, destination vacation, or an upcoming education fund, having these in mind and portioning savings out will help tremendously.
Know Where You Stand Today
Examine your current spending habits, fixed costs, and inbound cash flow. The best thing to do is to sit down with all of these in find and see what percentage of your expenses take up your paycheck. This easily allows you to see your available spending money per month and then set clear percentages for saving accounts based on your short term and long term goals.
Forbes recommends the golden “50-20-30” Rule to stabilize your budget. Spend no more than 50% of take home pay on fixed costs (rent, mortgage, insurance, utilities), 20% on financial goals (savings, paying off debts), and 30% on flexible costs (food, travel, entertainment). Sticking to this rule will help your financial boat stay above water.
Strategic Spending and Crush Bad Debts First
Some debts help your financial standing and others can kill them. Work on “bad debts” like credit cards and personal loans before completely tackling “good debts” such as student loans, mortgages, and or business loans. Make minimum payments on the “good” and work quickly to finish the “bad”, ones with higher interest rates in or to eliminate accumulation. Student loans can be a weight to your finances but were an investment for the future and are typically tax-deductible. Making consistent monthly payments can increase your credit score, which is great when going for future financial endeavors.
Invest on the Front End
Finding ways to prepare for your financials goals sets you up to complete these goals more efficiently. Set up savings accounts and setting aside a percentage of your wage, even if you dont have that final goal in mind, starts the fund when needed. Create an emergency savings fund for those dark days, which will keep your goals on target if something were to occur. Many areas have Prepaid Tuition Plans to opt in early to secure education rates 10 or 20 years from now. Think long term with retirement funds such as a 401(k) or ROTH IRA.
No time then the present to start thinking about how you will spend your money down the road.