It’s not surprising that saving money and getting on track financially are some of the most popular resolutions people make each year. Regardless of your current situation in life, most people want to work towards greater financial success so they can feel confident about their future.
If this is the year you want to get serious about your finances, review these four critical habits for pursuing financial success.
1. Plan Ahead and Set Financial Goals You Want to Achieve
Have you ever wondered where you will be in five years? Will your income and savings have changed? Will you be retired or working at another job? While financial success may fall into the laps of some, most of us need to actively plan where we want to be in the future, as financial success is typically the result of proactive planning and action. A good way to start planning ahead is to break your big goals into smaller, digestible pieces. This can help you stay on track and work towards your larger long-term goals.
Let’s say you’re 30 years away from retirement and you’ve estimated that you’ll need around $4 million to retire. Rather than focus on saving $4 million by the year 2047, try establishing several short-term goals, such as reaching $500,000 in retirement assets by the year 2020. Once you reach that goal, you can reassess where you stand and create a new savings goal for 2025, and so on.
The same principle applies to just about any short or long-term goal, from saving for college to buying a house. In order to know what strategy to employ (such as deciding between saving first for retirement or college, you’ll need to know what you ultimately want to achieve. This is why setting goals is so important.
2. Set a Budget (and Stick To It)
Regardless of your income, there’s a reason why so many financial professionals recommend following a budget. A budget helps you establish parameters for operating your household, understand if your goals are achievable in your desired timeframe, and may help reduce stress in the event of an unexpected incident, such as the loss of a job or an injury.
When creating your budget, you will first need to determine what your necessities are. Ask yourself, “If I were to lose my job tomorrow, what expenses must I maintain in order to run my household?” This may help you realize that you may not need the premium cable package, but it’s necessary to keep the A/C and heater running.
After determining your necessities, you can build into your budget the savings goals you previously determined you wanted to achieve. Compare the two and any additional funds left over can be used for expendable expenses.
3. Save Early and Often
One of the biggest benefits of saving early and regularly is the power of compound interest. If given the choice, most people would choose to spend less money on achieving their goals so that they have more money to pursue their passions in life. Compound interest helps the money you put away grow faster due to interest building upon itself. You can make your money work smarter rather than harder to pursue your goals.
If you procrastinate and delay saving, you not only lose out on your money working for you, but you also make it harder on yourself. You’ll also have less time on your side, so you will have to save more money and may have to increase your tolerance for risk in order to achieve your goals.
4. Seek the Guidance of a Professional
Think about professional athletes. They have coaches and trainers that keep them focused on the critical areas for success. These coaches have the experience and expertise in training with others to help their athletes work more efficiently and more effectively. Or, if you’ve ever worked with a personal trainer at the gym, you may know firsthand that you feel much more motivated to keep progressing because you have someone to check in with.
A financial advisor can serve as a financial accountability partner, providing ongoing guidance, support, and advice. It’s easy to slack on your budget or slip up on following your goals when you don’t have someone holding you accountable. Find a financial advisor you trust to help you stay on track and provide advice when you need it.
Are you looking for an accountability partner to help you work towards your goals? Do you have some questions on how to put these tips into action? I’d appreciate an opportunity to help you evaluate your current situation. To set up a meeting, call my office at (949) 221-8105 x 2128, or email me at [email protected].
About Mike Loo
Mike Loo is an independent financial advisor with more than 20 years of experience in the financial services industry. His mission is to provide a meaningful impact on the lives of clients and the people they care most about, help them make educated decisions with their money, and build a strong financial foundation for both themselves and their next generation. Mike is committed to meeting a high standard of excellence, taking the time to listen to clients’ needs, and designing strategies that aim to help clients save money and reduce debt. He seeks to fit a client’s investments into their life and educate them so they’ll understand their investments. To learn more about how Mike may be able to help, connect with him on LinkedIn, call his office at (949) 221-8105 x 2128, or email him at [email protected].
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Trilogy Capital, a registered investment advisor. Trilogy Capital and Trilogy Financial are separate entities from LPL Financial.