With a Little Planning, You Can Achieve Your Financial Goals
*Photo by micheile henderson on Unsplash
Steve Poehler—my brother and this week’s guest writer, discusses how you can achieve your financial goals, with a little planning. You can read more about his background after the end of his article.
Yogi Berra once said, “If you don’t know where you are going, you’ll end up someplace else.” John Beckley famously quipped, “Most people don’t plan to fail—they fail to plan.” Then there’s this nugget from Antoine de Saint-Exupéry: “A goal without a plan is just a wish.”
Yes, it’s difficult to get where you want to go in life without a plan, a roadmap, or a guide. The same holds true when it comes to finances.
Achieve your financial goals by creating a plan and sticking to it.
But how do you come up with that plan? How do you end up financially where you want to be?
You can start by following these steps.
Get Organized
It’s challenging to know what goals to set if you don’t have all the necessary information.
What are your sources of income, and how much do you receive each month?
What are your “set” expenses, what are your “variable” expenses, and how much are these each month?
Set expenses include such things as natural gas, electricity, mortgage, TV and internet, and child care costs. Variable expenses are those that still might be needed but are more flexible in amount, including entertainment costs, groceries, and gasoline.
I highly recommend creating an Excel spreadsheet to do this. Even handwriting the information on a piece of paper will suffice.
At the top, you can include sources of income and amounts, followed by set expenses and variable expenses. Then you can total up your income and subtract your expenses, so you know how much more you are earning than spending, or how much more you are spending than taking in.
Set Clear Goals
Once you have the necessary information, establishing clear financial goals should be your next step in the financial planning process to achieve your goals.
Do you want to get out of credit card debt? Do you want to start saving for retirement? What about purchasing a home or a new car?
Work with your spouse or significant other to identify short-, medium-, and long-term goals. Commit your goals to paper and then plan and prioritize objectives to achieve them.
Remember—as you prioritize, be prepared for conflict. It’s not unusual for couples to disagree when it comes to financial matters.
Resolve To Spend Less Than You Earn
Spending less than you earn is the key to being able to save and invest money and live comfortably.
Continually look for ways to cut your expenses and/or increase your income. A key point here—it’s almost always easier to reduce expenses than to add revenue streams.
Do you belong to a gym that you no longer go to? Do you have a Netflix subscription but never watch it? Instead of always eating out at the nicest restaurant, how about trying the Chipotle down the street?
Living beneath your means should be a priority. If you spend more than you make, then inevitably you will end up with a credit card or other debt, and the spiraling circle begins—where you don’t make enough money to cover “normal” monthly expenses, and now you’ve got an additional credit card payment that you also cannot afford.
Create An Emergency Fund
Certified public accountants (CPA’s) from the American Institute of CPA’s recommend that you have three to six months of living expenses on hand in savings. That way, when emergencies and unexpected expenses come up—and oh, they will—you can utilize those reserves without overextending yourself and not being able to cover your recurring monthly expenses.
Investing some funds in a money market account or mutual fund is a good idea, since these options typically pay higher rates of interest, while still allowing easy access to your funds.
Of course, setting aside enough money so you have that three-to-six-month buffer is easier said than done. That leads us to the next strategy.
Make Saving a Priority
The best savings strategy is to set aside money before you have the chance to spend it.
Some employers offer automatic savings plans that deposit money directly from your paycheck into a savings account or tax-deferred retirement plan such as a 401(k). You can also set up automatic transfers directly with your bank.
There are many brokerage companies with programs that allow you to invest as little as $25 or $50 per month through automatic deductions from a savings or checking account.
Pay Off Your Credit Card Debt
Arguably the worst kind of debt you can have is credit card debt (see above under “RESOLVE TO SPEND LESS THAN YOU EARN”).
If you cannot pay off your credit card every month, then you are likely living beyond your means. And once that credit card balance gets up there, it doesn’t take long to snowball, since most cards have high-interest rates—and the additional interest charge each month can be substantial.
If you’re carrying high credit card balances, make debt reduction your No. 1 financial objective. Consider consolidating your debt and making the highest monthly payment you can manage.
One good resource is GreenPath Financial Wellness, which can help you pay off high credit card balances and consolidate into one monthly payment.
Until you are credit-card-debt-free, resolve to only make purchases that you can pay with cash. This is another step in the process of achieving your financial goals.
Evaluate Your Insurance Coverage
Ensuring that you have adequate insurance coverage is vital to protecting your family and your assets. Many people are forced to declare personal bankruptcy every year because they have an expensive medical need, and they are either uninsured or underinsured.
Key policies to review include health, disability, life, automobile, and homeowners’ insurance. Make a checklist of your policies and the amount of coverage you have.
Determine whether changes in your financial and family life warrant adjusting coverage. For example, if you recently started a business in your home, you may need to augment your homeowners’ insurance to protect equipment or other related items.
Bottom Line
The key to completing these steps is being patient and disciplined to follow through on your plan, even as the daily rigors of life and unanticipated changes come up.
But you can achieve financial freedom! It’s within our reach.
Steve Poehler is a father, a husband, and a huge sports fan. A former sports writer, Steve is now a CPA who spent five years working at a public accounting firm before becoming a Senior Financial Analyst for a nonprofit organization, the Catholic Archdiocese of Portland. Steve loves to work out, be outdoors, and follow sports, including his beloved Denver Broncos. Steve lives in Portland, Oregon, with his family.
