17 Oct

Identifying Your Short, Medium, and Long-Term Goals. The first step in financial planning is to identify your goals. Your short-term goals (five years or less) might include a wedding, a honeymoon, furniture, and a new car. After that, you need to think about medium-term goals, such as owning your own home and financing your kids' college educations. Finally, list your long-term goals, such as retirement and travel.

Estimate how much money you'll need to meet each of your goals. There are a variety of online savings calculators you can use to determine how much you need to save each month to reach that goal within your time frame.

Budgeting To Meet Your Goals. When budgeting, set aside money to go towards your short-term, medium-term, and long-term goals, try not to sacrifice one for the other. Read Frugal Fanny for some more tips.

Really Track Your Spending. Ideally, you will know exactly how much money you spend every week, as this is the only way to stay true to your budget. Alan Moore, Founder of Wisconsin-based Serenity Financial Consulting, says, "There is one thing that most wealthy individuals have in common -- they know how much they are spending. While 'spend less that you earn' is good advice, you can't follow it without tracking your spending so you know exactly how much is going out every week."

This means tracking everything, down to every single Starbucks coffee, every single quarter spent on laundry. Write it all down.

Learn to negotiate.  This goes for everyone but especially for women since women are 2.5 times more likely to have a “great deal of apprehension” about negotiations.  failing to negotiate your first salary and starting your career at just $4000 less in salary can result in a career income loss of over $500,000 by age 60.  Since men are four times as likely as women to negotiate their first salary, this may have a major impact on the salary gender gap.  It may actually be a “negotiation gap” rather than a gender gap in income. Understanding the market value of your work is not too difficult to find on sites such as Glassdoor.com and Salary.com.  Taking that knowledge into face-to-face negotiations with your employer or prospective employers can have a significant impact on your finances.

Start out saving a higher percentage of your income. The difference between saving 10% of your income (which is the rule of thumb) and 20% of your income is significant over your lifetime. Recent graduates today are saddled with student loan debt, which does make this more of a challenge but that said, starting early and committing to saving a high percentage of income is a sure wealth builder.

Get Insured. Renters insurance, homeowners insurance, vehicle insurance, and umbrella insurance protect us from liability and loss of property while health insurance, life insurance, and disability insurance protect us from unpredictable events and illnesses. Without disability insurance, how will you pay your bills if you're hurt and can't work? Where will you live if your apartment is flooded by your upstairs neighbor? You can get quotes and compare different insurance companies.

According to Lindsey Pollak, a bestselling author, keynote speaker, and career expert at The Hartford Financial Services Group, all 20-somethings should have disability insurance. "Younger workers may think their health isn't at risk, but disability insurance can cover more mundane reasons to be out of work," she says, adding that pregnancy is the most common reason millennials need to take time away from working, though accidental injuries, such as sprains and concussions, and diagnoses, such as depression and anxiety, are also frequent occurrences.

With proper insurance, there would be no need to break into savings or rely on family.
Disability insurance can be arranged through your employer for less than a dollar day, so take advantage of it.

Marry someone you deeply love and stay married. Obviously no one goes into a marriage planning on getting a divorce but nearly 50% of marriages end in divorce. Divorce has an extremely negative impact on finances.  Just the legal cost of a divorce itself runs about $20,000 per couple. There are other hidden costs.  Splitting assets may have tax implications with an investment sale triggering capital gains taxes.  Selling property may also result in a “fire sale” at an inopportune time in order to dissolve the financial union, resulting in thousands of dollars in losses. 86% of married couples who reported being unhappy in their marriage reported that things had improved within a few years.  Though this is not true for all marriages and some couples aren’t meant to be together, being happily married can be a great boost to your financial health.

Learn how the tax system works.  Focusing on your career and moving up the ladder or starting your own business makes you money but you don’t want to give it all to Uncle Sam.  With the Federal deficit still hitting over a trillion dollars this year, the writing is on the wall that taxes are going to have to continue to increase. Become a tax expert and consider the tax implications of your financial decisions. 

Start a retirement fund and invest money. Most companies offer this at work, but there are numerous companies out there that explain the different packages and advise you. 44% of people said they planned never to invest again after the 2008 stock crash. A survey by Wells Fargo found 8 out of 10 millennials said the Great Recession taught them they have to save "now" to "survive" economic problems down the road. There are so many ways to invest other than the stock market, I have always worked with Wells Fargo and my husband is into Bitcoin. Opposites attract.

In general, the average American is in a horrible place for retirement. Even with a careful savings and withdrawal plan, most people do not have enough money to last for a few years. Ask questions!

“To achieve what 1% of the world’s population has (Financial Freedom), you must be willing to do what only 1% dare to do...hard work and perseverance of highest order.”
Manoj Arora, From the Rat Race to Financial Freedom


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