Whether you’re younger and attending school, a parent raising children, exiting the workforce to retire, or anything in between, it’s crucial to make sure your finances are in line so that you can achieve your financial goals. These goals tend to be long-term, as building up equity and paying for large expenses can take long periods of time. There are also several factors that affect these goals, so it’s important to focus on setting yourself up for success later down the road. Read on to learn more about how to keep up with your monetary goals.
Build Your Credit
First, your credit is important at practically any stage in life and can affect your ability to get approved for a loan or rent an apartment, for example. If you’re someone with a more established credit history, you may not need to work much to improve it. However, if you’re a teen, young adult, or simply new to the world of credit, it’s a good idea to start building your credit as soon as you can. Getting your first credit card will start this process, and as you work to pay it off in full each month, your credit will slowly improve. Remember that credit is a long game and if you’re just starting out, you’ll need at least a few months or even a year to see a positive change.
If you’re a more experienced credit card owner, consider applying for another credit card, as part of your credit score depends on the number of credit accounts you manage. Only do so if you can handle another card responsibly! Another card will increase your limit and decrease your utilization ratio, which factors into your credit score favorably. Other than that, making sure you pay your bills on time and in full will ensure your credit improvement.
If one of your long-term goals is to buy a house, your credit will be a large factor in borrowing money to purchase one. Boosting your credit as much as possible will grant you lower interest rates after getting a mortgage pre approval, which will determine exactly how much money you can borrow. This will help you choose the right house based on factors like size, location, and features. From here, you can begin to develop a plan of how you’ll handle your finances for this large of a repayment plan.
Whatever your financial goals may be, you’ll need to ensure that you can manage them as well as have money available to you whenever you might need it. Your monetary assets also factor into getting approved for lines of credit or loans. Many large financial goals require financing or paying back large amounts of money over time, as many people can’t afford to buy a house (or even a car) with cash. However, you’ll likely need to provide a down payment, which is usually a percentage of the cost of whatever you’re purchasing. Additionally, it’s a good idea to have an emergency account set up somewhere in case you need to pay for an unexpected expense.
When buying a house, you’ll want to ask yourself, how much house can I afford? This goes hand in hand with how much cash you’ll need for a down payment or other expenses, like closing costs. These are all dependent on your current debt situation and annual income. Make sure to work off as much debt as you can before purchasing a house and you’ll have an easier and more affordable route to homeownership.
Allocating a small portion of your paycheck to a designated savings account will help establish a steady funnel of money into that account, which will build up over time. Some bank accounts such as certificates of deposit (or CDs) allow you to earn much higher interest rates than a normal savings account, as long as you don’t touch the money for a certain predetermined amount of time. If you’re in a position to tuck away money without needing access to it for a few months or even several years, this is a good way of making money with your money.
One of your goals in life may be to get married, and weddings can be quite expensive. While there are several ways to tie the knot on a budget, weddings (and the following honeymoon) can still be costly. You and your partner will both need to work to save up to make your dream wedding possible. Or if you hope to go on a vacation, you’ll still want to budget for this and save some money from each paycheck.
Budgeting your current lifestyle is another great method of saving money. Take a look at the expenses of your everyday life and determine which extra takeout meals and groceries you can live without. Driving less and choosing more affordable options for food, activities, and travel will add up over time, saving you money that you can alternatively spend on your financial goals.
Your financial goals will, for better or for worse, be influenced by your career, as your job will fund these goals. It will be important to save for retirement as early as you can, which can be easily done through an employer’s 401(k) plan. It’s a good idea to contribute to your retirement account as aggressively as you can so that money can accumulate and grow as time goes on. It’s advised that you put 10% to 15% of your paycheck into your retirement fund, some experts recommend even higher. This number should be tailored to your situation though, as a young professional’s first job salary is usually going to be much lower than an experienced employee who has been in the workforce for longer. This is of course also dependent on the kind of job you’ll work and what industry you’re in.
Speaking of salary, you’ll want to make sure you’re making enough money. As a fresh college graduate, you may not have a humongous income, but as you grow, get promoted, and find new positions and experience, your income should increase as well. Always make sure that you’re looking for new opportunities that will allow you to live your best life and achieve your financial goals.
Many financial goals can be daunting and feel impossible to accomplish, but with proper preparation and planning (and some hard work), reaching your financial goals is achievable. By starting early and doing what you can to improve your credit, secure a good job, and tuck away money for the future, you start a few steps in the right direction!