A financial plan offers a complete overview of the financial goals of individuals and shows them the steps they need to pursue to achieve them. It also offers an understanding as to whether individuals are on the right track to meeting their financial goals, otherwise can bring adjustments to their spending. With a long experience across industries such as banking, wealth planning, stock trading, etc. Scott Tominaga is presently specializing as a financial advisor. According to him, generally, in the written document of financial planning people combine their investment plan, retirement plan, short to long-term goals, estate plan, etc. In this article, Tominaga offers a comprehensive guide about the know-how to achieve financial goals.
Set Financial Goals
Goals are vital elements of a financial plan. Formulating a saving plan based on individual financial goals all through life is the key to using money wisely and achieving the goals. Now depending on the type of goals, categorize them as follows
Short-term (6 months to 5 years) goals: Short-term goals unusually include paying down minimum existing debt, forming an emergency fund, establishing education funds for kids, etc.
Mid-term (5 to 10 years) goals: Buying insurance, building funds for the down payment of owning a home.
Long-term (10+ years) goals: retirement planning, buying a home, buying a car, daughter’s marriage, etc.
Follow a Budget
Rather than considering the budget as a way to confine the spending, adopt it as a handy tool to smooth monthly cash flow enabling individuals to take care of their savings and investing habits while having room for dining with family outside, etc. Having an eye on all sources of income and spending is the key to evaluating that they are on track to fulfill their short-term, mid-term and long-term goals while meeting discretionary expenses for entertainment, gifts, restaurant bills, etc.
Build An Emergency Fund
The future is unpredictable for preparing for the rainy days makes sense. Whether it is a medical emergency, job loss, business breakdown, or anything else, it is recommended to form a fund for at least 3-6 months of living expenses as a buffer to rearrange after a setback.
Manage Debt
Understanding and having control over debt is an integral part of forming a stable financial plan. Building a steady credit history can be instrumental in boosting one’s credit score and consequently helps individuals enjoy lower interest rates on loans, fast credit approval, flexible payment terms, etc. To manage debt wisely, follow the strategies below
- Always pay EMI/ installment on time
- Review credit reports regularly to ensure their accuracy
- Pay excess than the minimum
- Know about credit limit
- Understand debt-to-income ratio
- Take debt only when needed
Protect With Insurance
Make sure to invest in insurance including life insurance, health insurance, etc. as they help counter unforeseen events of life. Having family health insurance gives coverage of a medical emergency for anyone in the family and helps save on paying the high cost of medical experience. Similarly, apart from long-term savings – life insurance offers financial backing to the dependents if the policyholder is no longer. Both insurances also offer tax benefits.
Plan for Taxes
Tax obligations are a staple of life while having effective tax planning empowers individuals to strategically lessen their tax liability. Rather than evading taxes, make sure to leverage the legal exemptions, by investing in IRAs, (HSAs), 401(k), etc. says Scott Tominaga.
Plan for retirement
Retirement planning is essential to ensure access to a stable stream of fund flow after retirement. It requires individuals to keep aside funds for investing in different types of investment schemes considering their retirement goals in mind. This also ensures financial stability to enjoy the golden days of retirement.
Those who are frantic to find the know-how to manage their money efficiently to reach their financial goals, simply follow the above master tips with diligence and see how it can make magic.
