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Get Financially Fit in the Next Four Years

September 19, 2016

Take a moment to think about your financial goals for the next four years. Do you want to be debt free, saving more for retirement or working toward a feasible budget? Where might you be? What could you be accomplishing? How will your life change? As you think through your aspirations, consider what you could accomplish financially. Regardless of what stage of life you’re in, the next four years can have a positive impact on reaching your budgeting goals. Here are four steps to get you started. 

1. Analyze Your Current Financial Situation

The first step is to analyze your current finances. Make a full list of monthly expenses that are fixed (such as rent, groceries and utilities) and others that are variable (entertainment, gifts, clothing). Subtract this list from your total monthly income. Make a calendar schedule of when every fixed expense is due and when your income will clear your bank account so that you can create a proper budget that takes your cash flow into effect. 

In this step, you should also analyze your current credit score and any outstanding debts. Will you have any life changes in the next four years that could impact either your score or your debts? 

Finally, organize all of your account information into several secure folders so you can easily access all of your accounts when you have an issue that needs to be resolved.

2. Arrange Financial Check-Ups

If it’s possible, try to connect with any/all financial planners that you and your family might have. Set regular annual or quarterly meetings to review your budget and savings or other goals. If you do not have a financial planner, then consider setting a calendar alert or reminder on your phone. When the alert pops up, compare your current funds, debt, savings or retirement with those smaller benchmark goals. Note your progress and identify any room for improvement. 

Don’t forget about conducting an annual insurance review with your agent. Many people don’t have nearly enough coverage, while others are paying too much for the coverage that they have. A SuperCheck® will help determine any coverage gaps and identify any discounts that you might be missing.

3. What are Achievable Financial Goals?

Now that you’ve analyzed your current financial situation and met with your financial professionals, you can choose a few big picture financial goals that you’d like to focus on in the next four years. 

When you set financial goals it gives your family a time to sit down and review priorities. If you agree to work toward a common cause the result you can accomplish things with less resistance and more teamwork. Setting monetary goals works to keep you accountable and ensures that no misconceptions exist about how money should be spent and saved in the next four years.

Consider some of these goal options.  

Get out of debt

Becoming debt free means that you’ll have full control over your income – and that’s an incredible feeling. Not only will you have more for spending, but more for saving and investing as well. It will free your mind of the worry and stress that come with debt. Work with a financial professional to create a reasonable and achievable plan to reduce your debt in the next four years.

Plan for early retirement

If you’re a millennial or in Generation X, reaching your retirement goals may take longer than you think. Planning to retire by 55, instead of 65, will give you some buffer time in case you hit snags in your savings plan. Although you may not want to fully retire early, you may decide that you would like to downshift and not work so hard.

Start by making small changes to live within your means so that you can begin saving some money each month. Even small amounts of money, if invested early on, can grow to an impressive amount with time. If you save $100 a month, that could grow to $31,644 in 16 years, assuming a 4% rate of compound interest.  

Retirement options are very different than they were even eight years ago. With so many acronyms like IRAs and 401(k)s, ​your local Farm Bureau agent can help you understand what’s best for you. You don’t need a lot of money to get started; what’s more important is that you start now and use a financial professional to help you along the way. It’s better to be able to retire early and not need to, than to need to retire early and not be able to. 

Have well-stocked emergency fund

An emergency fund is a stash of money set aside to cover the financial surprises life throws your way. These unexpected events can be stressful and costly. An emergency fund can take away a lot of the money worries that you have, since you know that you will always have a reserve should you get into a tight spot. 

An emergency fund also provides you with an intermediate funding source – a kind of halfway point between your paycheck and your investment accounts – that you can use so that you don’t have to disturb your long-term investments. 

Having a fund that covers at least 3-6 months of your income is recommended, but more never hurts! The ideal emergency savings goal might be as little as three months or as much as two years of expenses, financial advisers say. It all depends on your personal situation.

Create a business succession plan

Do you have a family business? It may have been in the family for generations, or it may be a recent start-up. Either way, you did loads of small business planning when you started it. But the question is inevitable: who will continue building the legacy and growing your small business? The fact is, only 30 percent of small business owners have a business succession plan. If you’re not sure how to get started, read these five tips to help ensure that handing off your business will be as smooth of a process as possible.

4. Manage Your Money Carefully By Tracking Your Progress

As with any goal setting, it is important to monitor your progress and measure your results. Doing so will help you determine if the strategies you are using are working.

There are countless tools, template spreadsheets and ideas to keep track of your personal finances, but what works for you is as unique as your goal. The important thing is to keep yourself motivated. You can do this by setting “check-in” appointments with yourself every six months, by discussing your progress with an accountable partner like a spouse, or giving yourself a visual reminder of your goal in a home office or library. 

No matter where the next four years will take you, make sure to use these four steps to get financially fit. To receive more monthly tips and advice, sign up for the Farm Bureau Financial Services newsletter here

Sources: 

http://money.usnews.com/money/blogs/on-retirement/2015/08/24/6-retirement-tips-for-millennials
http://www.goodfinancialcents.com/good-financial-goals/