As we close out 2021 and look forward to 2022, you may have some ideas on how to improve your financial future. As my kids have told me, “adulting” is not easy, so I would like to share some basics I taught them that may help put yourself in a better position financially. As I tell my kids, with age comes responsibilities—and poor money management can lead to stress. So get started today… and stop stressing!
#1: Figure out your goals and budget
Your financial goals will change as life changes, but if you do not have a roadmap of where you are going, you’re not likely to get there. Once you know your goals, you can set up a budget, which will help you stay on track and is easier than it sounds. Start by adding up your income and expenses. If your expenses are more than your income, you will need to do some adjusting to your budget to make it work. If the income side is higher, you may have money left over to invest.
#2: Have an emergency fund
Make sure you have at least three to six months of expenses saved in a short-term deposit account such as a savings account, money market or CD with a maturity of one year or less. You never know when the unexpected will happen, and if you do not have an emergency fund, you could find yourself using a high-interest credit card or taking out a loan—both of which will put additional strain on your budget. One of the factors in your credit score is paying your obligations on time, so having an emergency fund will help you maintain a good credit score.
#3: Sort and itemize your goals
There are three timeframes to consider: short-term goals (like a new car or a vacation), intermediate goals (such as buying a house or saving for college for the kids), and long-term goals (like retirement). Saving a set amount every year toward your long-term goals will help make sure they happen. It might be easy to buy that new car or take that vacation, but keep your long-term goals a priority—you need that compound interest to work for you. Retirement can seem far away, and it can be easy to let this item slide and think you can catch up later. But pay yourself first, as retirement will be here before you know it!
At the very least, take advantage of your employer’s retirement savings program, and put in enough to obtain any employer match. Over time, increase your contribution with each raise. If you receive a three-percent increase in pay, put an additional one percent toward retirement savings. Not sure how much you need? Work with a qualified financial advisor to make a plan and stick to it the best you can.
Wishing you a Happy New Year and the best of luck on achieving your financial goals! Remember: you have to start somewhere, and it is never too late to start saving, stop stressing and get going. PM
Daryl R. Dagit, CFP, CRPS, CEP, is a financial advisor and market manager in Savant’s Peoria office. This is intended for informational purposes only and should not be construed as personalized financial advice. Please consult your financial professional regarding your unique circumstances.