The 3-Step Plan To Map Your Financial Future

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Money growing in potted soil.

If you want your money to grow in the future, you need to seed the soil now.

Maybe you don’t think of yourself as much of a cartographer, but you should never set out on a journey without a plan of how to arrive at your destination. And that includes traveling into your financial future.

As 20-somethings, it often feels like we have to manage so many financial obligations just to stay afloat. Because of this, it can be hard to look past the next payday—let alone to the next year or decade. However, it’s essential to think about your finances in a long-term context. Here’s a three-step plan to help you do it.

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1. Change Your Mindset

Despite being arguably the most important factor in our lives, we often overlook financial management. Hey, it would be nice if money somehow took care of itself, but that just won’t happen. Truthfully, you need to manage your finances as strategically as your career and nurture them as carefully as your relationships.

To do this, you need to create not only a weekly or monthly budget but also a long-term plan. For your plan, remember that simply spending less than you make will not tell the whole story—your income, savings, debt, and financial obligations will all change over the course of your lifetime.

Some changes will be dramatic, such as having children or retiring from your career. Others will be gradual, such as finally paying off a large consumer or student loan debt. In any case, how much you earn and how much you spend will vary each decade of your life. Remember to think about that future when coming up with your plan.

2. Put It In Writing

The easiest way to prepare your financial plan is to sit down and write out your life goals, then write estimates of their costs right next to them. What do you want to have at age 30, 40, 50, and beyond in terms of education, family, and lifestyle?

As I finish my MBA and approach age 30, having a family will become a priority in the not-so-distant future. I know kids are crazy expensive, so I’m thinking now about putting money aside to help when my income is reduced by maternity leave. Likewise, home ownership is something I’m considering in the next few years, which means shifting my disposable income to savings for a down payment.

Planning for big goals that are a few years ahead is a simple as writing them down and then working backward to determine how much you need to save now to achieve them.

3. Stay The Course

A plan is just a dream unless you execute it. Saying you want to pay for your future children’s college educations or save seven figures for retirement is a great destination—but if you’re not following the steps to get there, you’ll never make them a reality.

One thing that you could make you veer off course? An unexpected event, such as a layoff, illness, or divorce. These instances aren’t pleasant to think about, but you have to prepare for them as well. Allocate money for such emergencies in the future, to help you stay on track with your other goals. You hopefully won’t need these funds, but preparing for the worst is better than the alternative of not preparing.

Ultimately, you don’t know yet what your financial future holds, but that doesn’t mean you can’t make a map to conquer uncharted territory.

Are you planning for your financial future? How will you get there?

(Photo: StockMonkeys.com)

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