One of the most important things that people can do is sit down and create a realistic financial plan. Taking an honest look at their finances can be intimidating for some people. Creating financial life goals that can be broken down into yearly or monthly steps can help make them easier to accomplish.
1. Plan
The first thing to do is to write down all of the things that it is desirable to obtain or accomplish over the course of a lifetime. Things like the ideal age at retirement, where to live and what the overall career path looks like are all important to think about. Is retiring in the community and spending time with friends ideal, or is traveling the world a lifelong dream? Short-term goals can also be written down. Paying down debt, switching jobs and budgeting for a new car can all have an impact as well. Write it all down so ways to accomplish them can be figured out. Without a plan in place to pay off debt and work towards building savings, it could lead to bankruptcy in Michigan.
2. Budget
Now that the goals have been determined, go through each one and get an estimate on how much each thing will cost. If paying off debt is on the list, then evaluate how much there is and how much money each month should be budgeted for it. If the goal is to get rid of debt within one year, the payments will be a lot bigger than if the goal is to spread that same amount over two or three years. Make a list of all daily, weekly, monthly and yearly expenses to figure out how much money needs to be set aside to cover them. Then write down what to do with any extra money, even if it is only 10 or 20 dollars a month.
3. Eliminate Debt
Figure out exactly what is owed in student loans, credit card debt, car payments and other things that are not paid off yet, except for the mortgage. A debt snowball can be a helpful method for some people to use. Put any extra money towards the lowest amount owed until it is paid off. Then use all the money that was going toward that payment and apply it to the next lowest item. Some people may prefer to pay off the loans with the highest interest rates first.
4. Pay Off Mortgage
Paying off a mortgage early may seem like a fantastic idea, as the payments are usually large, and freeing up that much monthly income can be wonderful. However, some companies have prepayment fees in place. Read over the paperwork carefully before contacting the company about paying off the loan early.
5. Plan for Retirement
It can be difficult for some people to plan for retirement. The different options can be daunting for people who do not understand the technical jargon used. If any help is needed, it is a good idea to talk to a trusted financial advisor about which plan is best.
Planning for the future does not have to be intimidating or scary. It is better to find and correct issues early. Talk to a partner or spouse about mutual goals to get everyone on the same page.
