In life, we all have big financial goals. I remember saving up for several years to purchase my first car – a used 1994 Honda Civic. Whether you are looking to purchase a home or a car, you need to find the best saving plan for you. Here, we will take a look at the important steps needed to make your big financial goals.
Have a Budget
The first thing that you will have to do is set a budget. A budget is simply a list of your income and your expenses. Your goal here is to ensure that your expenses do not exceed you income. This will provide you with the foundation to save money and reach your financial goal.
One of the best ways to budget is to use a free budgeting app. Here are three excellent options:
- Mint by Intuit
- Pocket Guard
- Personal Capital
Create An Automated Savings Plan
Once you have set a budget, you will be able to set up the best saving plan to get to your financial goal. The easy way to save is to automatically sweep that money into a savings or money market account. This will help you to grow your savings faster. When looking at money market accounts, be sure to shop around for the best money market rates.
Pay Off All Debt
It will be important to pay off all of your debt in order to reach your financial goals. That’s because debt usually incurs interest. In the case of some credit cards can charge an annual percentage rate of nearly 30% per year. For example, if you own $5,000 in credit card debt, then you will have to pay almost $1,500 just to service the debt! By paying off your debt, you can lower your monthly expenses.
Have an Investment Strategy
Now that you have some money saved up, it is time to put that money to work. You have a number of options. That includes putting your savings in a money market fund, investing in stocks or purchasing bonds. Be sure to consider your risk tolerance. As an example, stock investing is more volatile. However, purchasing stocks can lead to higher returns. A good strategy is to own a diverse range of investments that will help return volatility and provide steady returns. Here’s an example of a diverse investment portfolio:
- 30% Money market funds
- 40% Stocks
- 30% Long-term bonds
Have an Emergency Fund
Life can hit you with unexpected turns. When that happens, you may end up with some unexpected expenses or an interruption in your income. Therefore, it is a good idea to have an emergency fund set-up. Financial experts recommend that you have at least six months of expenses set aside for emergencies. Here are some examples of situations that can lead to financial emergencies:
- Job loss
- Medical emergencies
- Car repair
- Home repair
- Death in the family
- Natural disaster
- Long-term illness
Track Your Progress
Finally, you will want to track your progress. This will let you know if you are going to hit your financial goals. Here is what you should review in order to track your financial progress:
- Bank accounts – Be sure to examine your checking and savings account at least once a week.
- Budget – Check your budget to ensure that you are not spending more than you make
- Debt – Look at your debt levels and see where you can pay down your obligations
- Investments – Check your investments each quarter to see how they are performing.
You can track all of your progress in a financial goal planner. This is basically a ledger where you keep track of your wealth to ensure that you are on the right path to hitting your financial goal.
Staying on Track for Your Big Financial Goal
If you follow the right steps, you can put together the best saving plan in order to meet your big financial goal. Remember that you won’t be able to hit your financial goal overnight. However, staying consistent will put you on the path to success.