No matter who you are or what your financial goals in 2014 happened to be, the best way to meet them (and exceed them) is to have a financial plan. A financial plan will reduce your stress, help you to overcome any “bumps in the road” that can often occur and also prepare you to meet your goals head-on this year. So, without further ado, let’s take a look at 5 Tips to help you put that plan together. Enjoy.
Tip 1: Know where you’re starting. Before you can put together an effective financial plan you need to know what your current financial status is. Gathering information to do that entails knowing what the balances on your 401(k) or, the amount of money in your savings and other taxable accounts as well as any investments you might have. It also entails knowing what debt you have including school loans, your mortgage and credit card debt. Also, don’t forget to factor in any taxes that you might owe from 2013.
Tip 2: Balance your portfolio by having a balanced investment strategy. Did you know that the average investor hasn’t beaten the Standard & Poor’s 500 index in the last 10 years? The reason why, according to a DALBAR study, is mainly due to the fact that people get too emotionally attached to their investments and overreact to the ups and downs of the market. They recommend that you tie your investment decision-making to research, data and rationality rather than speculation and emotions.
Tip 3: Make a decision to cut down on spending and stick to it. Many people (ourselves included) simply spend too much money on things that we truly don’t need. From clothing to collectibles, fast food to alcohol and many other things, one of the best ways to meet your financial goals in 2014 is simply to cut way back on spending. A great rule to follow is to stop and look at every purchase decision that you make and ask yourself “do I really need this?”. If you don’t immediately say “yes” then simply don’t purchase it. It might not be as much “fun” but it certainly will help you to stash a lot more money in your savings, retirement account or 401(k).
Tip 4: Ask yourself “What if?”. While some people might think of it as “bad luck”, the fact is that occasionally everyone needs to ask himself or herself “what if?” and take a long, hard look at the answer. This might include asking yourself “what if a tornado destroyed our home?” or “what if my 10-year-old car broke down and needed major repairs?” Asking those questions and, more importantly, having a financial answer for them may be the key to salvaging your finances if an emergency actually does occur. For that matter, even smaller, minor events can sometimes have a surprising impact on your savings and finances and asking yourself “what if” for those is a good idea as well.
Tip 5: Make 2014 the year you fund your emergency account. We’ve said this many times in other blogs but the fact is that an emergency account is just that, an account (usually savings) that you’ve stashed money in should an emergency occur. It should be, ideally, six months’ worth of your current salary but, if possible, 12 months is even better. In Tip 4 we talked about asking “what if” and your best answer to any what if question is having an emergency account set up. If your house burns down (heaven forbid), someone in your family gets sick or any other unforeseen circumstance occurs, your emergency account might be the difference between being okay and being ruined financially.
And those, dear readers, are the best Tips that we know of to help you meet and, hopefully, exceed your financial goals in 2014. If you have any questions or comments about our Block today please let us know by dropping us an email or leaving a comment here on our website. If you do we’ll be sure to get back to you ASAP with answers that you can use.