Few people go through life without running into a money problem or two; it’s to be expected. Financial troubles are made worse by neglecting to have a plan in place that would help manage debts, increase savings and cover for emergencies. Without a plan, even the smallest financial glitch has the potential of turning into a major event. In other words, failing to be proactive about how you’ll spend your money and save for the future is simply setting the stage for failure.
The Dreams of Youth
Many young people have idealistic dreams and the bravado to announce to the world how they will one-day be a millionaire. High aspirations and hopes are what keep the dream alive, but without a specific plan of action most fail to even come close to reaching their goal. While youthful dreams may be seen as too lofty and even unrealistic, they would be within reach with enough thoughtful planning, perseverance and hard work. If the dreams we have when we’re young don’t come true, hopefully, we begin thinking about the future in a new way, and hopefully putting a plan in place.
Better Late than Never
As we move into the hectic years of family responsibilities and career opportunities, we may assume that income would remain consistent and even increase over time and that there is plenty of time down the road to plan for the future. This is another example where failing to plan is a plan to fail.
The future never truly arrives, which mean a plan is one for life and not a temporary fix or an adjustment that needs to be made periodically. These are the years when, even in the midst of the chaos of family and career, focus should be placed on investing in the future, albeit investments, college tuition and retirement accounts.
You don’t run an efficient household or expect to be promoted at work without following a plan, so why would your finances be any different? While it’s true that there are no guarantees and plenty of stories of retirees who have lost large portions of their net worth due to market fluctuations that were out of their control, it’s always smart to play the odds. Some of us reach our golden years wondering how we let so many opportunities pass us by. The fact is that it’s simply never too late to set a new goal.
Breaking it Down
Every plan regardless of intended outcome is purely speculation about what’s down the road, but designed with hope for a positive future and an important attitude to establish for achieving success. If you think you can do something and are willing to put in the hard work, any goal is attainable with a workable plan of action.
From high school into your golden years and from simple ideas to complex details, financial plans will fluctuate and evolve over time. Be careful not to set a target date that’s set in stone, life can’t be categorized to such an extent and you’ll be discouraged and disappointed when you miss an unrealistic deadline.
Generally, a plan should be broken into stages and tackled one at a time. A five-year plan will be easier to commit to and manage than one that attempts to see down the corridors of time through all stages of your life. A long-term plan is okay as a guide but a workable plan needs to be about where you want to be in short bursts. Accomplishing a shorter, term goal will instill confidence and the encouragement needed to stay on track for the next plan of action.
Many people share common goals that start with a good job with potential for advancement and opportunities for personal growth. As we grow older, a home and a new car are typical goals, as well as establishing deeper relationships, starting a family and raising children. There will be changes in the financial plan for each stage bringing new challenges and rewards.
Start by Prioritizing
A financial plan is only a benefit if there’s an order of priorities so that the most important issues are dealt with first with the least essentials at the bottom of the list. Top priorities are the items that would be most painful if you failed on your obligation. If for some reason you have insufficient funds to keep with your plan, you won’t miss the most important payments at the top of the list like for your home, heating/cooling and food.
A general list of priorities may look like this:
- Mortgage/Rent (incl. insurance and repairs)
- Transportation (incl. fuel, insurance and repairs)
- Credit and loan payments
- Clothing/School supplies
- Health Insurance
- Household supplies
- Life Insurance
Importance of Insurance
One vital aspect of a financial plan not to be neglected is to have adequate insurance coverage. One devastating tragedy or disaster can decimate your entire financial plans unless you’re protected by an adequate policy. Health insurance is now required for all Americans and policies against loss or damage should be secured to protect your home and belongings, car and life. Additional coverage may be beneficial in some situations, i.e., long-term care, supplemental healthcare, etc.
When Troubles Arise
You have three options if you don’t have enough money to cover your financial plan – cut expenses, increase income or both. Get professional help when there are assets to protect; for example when you have a loved one in a healthcare facility or when issues arise with government services like Medicare and Medicaid. Keep in mind that when you have the right financial plan in place, it’s possible to recover from financial bankruptcy and begin planning for a secure financial future – it’s never too late.