If you’re building a strong financial future, you have at least five questions to ask yourself when setting financial goals. When it comes to your finances, it’s essential to find the solutions that work best for you.
1- What do you want to do with your money?
Many people ask this question. You may have multiple answers about your financial goals. You might lack clarity about what your financial goals “should” be:
• You know you shouldn’t want to run up too much credit card debt.
• You know you don’t want to be caught off-guard in an unexpected job loss, disability, death, or relationship crisis.
If you address your concerns, e.g. too much credit card debt or putting away enough money in an emergency savings account, your first steps are simple ones:
• Create a spreadsheet that includes your credit card accounts. Enter the credit card issuer’s name, account number, and how much you owe on each credit card. Review the annual percentage rates (APRs) associated with these accounts. Do you pay each account in full at the end of the billing cycle or do you make minimum payments?
• Tally up the total amount of your credit card debt.
• If you owe more on your credit cards than you can easily pay off in one or two billing cycles, select the account with the lowest balance first. Double your monthly payments on the credit card account until it’s paid in full.
It’s also an excellent practice to save money for a rainy day. Open an emergency savings account and deposit money into it every payday.
2- In what financial areas do you feel confident? In what areas are you less financially informed?
As you consider your financial goals, you may fully understand how and why your retirement plan is essential. You may have less confidence in your insurance policy choices or Social Security benefits.
Schedule a call with your insurance agent. Ask questions about your homeowner or rental policy. Are you adequately insured? Has your home appreciated in value? Do you own some items that aren’t adequately insured, e.g. art, jewelry, or antiques?
Get more information about Social Security benefits by opening a My Social Security account. You pay into the Social Security system and it’s good practice to check your SSN account for errors. It’s possible to request a new Social Security card or change your address online in most cases, too.
3- What are your ingrained thoughts about money?
What did your parents teach you about money as a child? Do you have conflicting thoughts about whether it’s better to save for tomorrow or spend today?
There’s no doubt that what we learned in our early years affects today’s behavior. If your parents helped you save money for college, saving money is probably established in your DNA. In contrast, if your parents encouraged you to live a little every paycheck, you might need to address how you feel about money in your 30s, 40s, 50s, and beyond.
4- Who can help you learn more about financial matters?
A trusted financial planner or advisor can help you to create a financial plan. If you don’t know how much money you spend each month, you can’t decide how much to save.
If you owe too much money, you may want to start with credit counseling as a first step. Consolidating your debts and paying off what you owe is the best place to start.
Recognize that the financial services industry can be confusing. A financial advisor may be an insurance and annuity salesperson who earns a commission when you buy their products. A financial adviser may be someone who sells stocks or mutual funds.
In contrast, a financial planner (sometimes called a CFP) creates a financial plan. If you’re interested in achieving your financial goals, a financial plan can help you get there.
Ask any financial advisor if they’re acting as a fiduciary, or in your best financial interests. A fiduciary is legally committed to work in this manner.
5- How do I avoid pitfalls based on earlier assumptions about money?
Making new financial habits can be challenging. For instance, committing to the decision to invest a certain amount of money each month in your retirement plan can result in fewer discretionary purchases.
Get support from friends and family about changing your money habits. Your significant other must be on board. Is your partner supportive of the decision to save more for the future? Do they agree it’s essential to save for unexpected emergencies or life events?
It’s important to ask questions when setting financial goals. Gather the information and resources you need to make and achieve a strong financial future.