Personal financial management can be overwhelming, and is a subject of a wide range of monetary concerns. I know I have felt overwhelmed many times. No matter the age, job title or status, we all face concerns when it comes to managing money. And though we all face similar concerns, at one time or another, personal finance is a highly individualized responsibility. A lot of our financial decisions are shaped by our goals, values, and personal ambitions. Moreover, some of us have greater access to resources than others. This is why our daily financial concerns are unique to each one of us. There is no ‘one size fits all’ solution when it comes to financial success. In a larger economic sense, we are all in it together, yet daily concerns are unique to each one of us.
With each person committed to distinct financial goals, the best path to financial success may not be the same, in each case. The key to finding your fast track to fulfillment is identifying financial priorities and establishing a focused plan for achieving those goals. Below are the three financial questions I believe we should all ask ourselves:
How important is home ownership to me?
Owning a home has always been the essence of financial success and ‘The American Dream‘. And it’s true there are a number of benefits associated with ownership, versus renting a home. Still, home ownership isn’t for everyone. For starters, real estate is not a passive investment – buying, maintaining, and improve property is hard work. Condos, flats and apartments, however, are administered by landlords, drastically reducing the amount of time residents spend addressing domestic duties. This is why I still choose to rent. I would like to have a larger emergency fund before I jump into home ownership.
Identifying a preference enables us to plot a course in the desired direction, satisfying our expectations in the most reasonable, timely ways possible. If ownership is a closely held priority, several steps will set you on the right path:
Save for a down payment – Establishing a designated account for building a home down payment can help you set-aside resources faster than pulling cash from your regular household cash flow. Depending upon the programs for which you qualify, your credit strength, and other factors; a down payment of twenty-percent may be required to initiate financing.
Study the local real estate market – Real estate markets ebb and flow, responding to demand and other economic forces. To make the most of your investment, study trends ahead of your home purchase, giving you the tools needed to make informed, cost-conscious buying dictions.
Explore financing options – Purchase price is an important concern for home buyers, but it is not the only financial matter would-be buyers must reconcile. The cost of financing represents a substantial share of the final cost of your home, so landing the best available terms can save tens-of-thousands in interest payments, over the life a mortgage.
Where do I see myself in five years?
This classic job interview question has forever thrown us- young people off course, challenging us to think ahead, on the spot. Applying the same question to our financial life helps illuminate priorities – regardless of where we are in our financial progression.
For best results, it helps to account for major milestones first. Are you planning to go back to college, get married or have kids in the next five years? Do you expect to incur child care or moving expenses? Is self-employment in your future, requiring entrepreneurial capital? Answers to these important questions give us near-term benchmarks to pursue, and a five-year plan provides a realistic time frame for adequate financial planning.
Are my retirement needs covered?
It is never too early to start planning and making financial moves in preparation for retirement. I started saving for retirement in my early twenties before I even understood what it was. My coworker told me that a 401K is something I should participate in. She said that I would save some money and then I would get “free money” from our company to match that. I did my research and found that to be true, so I enrolled immediately . Although each person’s financial circumstances are unique, advisors promote savings and retirement thresholds consumers can use to guide investment decisions – how money should be allocated at a particular age, how to evaluate risk tolerance, etc. As you assess preparedness, use these strategies to make the most of your retirement resources.
Maximize employer benefits – Retirement benefits are part of your compensation package, so it is essential to make the most of employer contributions. Maximize matching programs such as your 401K, for example, to make your money grow faster; and take advantage of any stock purchase and profit-sharing plans offered at work.
Educate yourself about financial products – Retirement and savings accounts are not the only ways to put-aside retirement resources. Educate yourself about different investment options and financial products. The more you learn about investing and economics, as well as fees associated with the more control you have over your financial destiny. I will be writing a post about those soon.
Seek professional help – Some investment advisors sell mutual funds and other investments, so they are biased, to a point. As a rule, consult with more than one financial professional, before making long-term commitments. And once you’ve bought-in to retirement investments, check performance and periodically review your account with your financial representative.
The most successful financial planning efforts start with well-defined goals. By identifying priorities and answering a few questions about our financial ambitions, we can succeed faster and feel empowered along the way.