Have you given any thought to what your financial game plan is? Have you identified what your financial goals are? Your financial game plan should include a review of your assets and debts, a discussion of your financial goals, and action steps to get you moving in the right direction.
Your financial goals will help you create your plan for the next five to ten years. You should decide whether you would like to own a house or whether you would prefer to rent. When you plan to own a house, you will need to plan for a down-payment, which should be approximately 20% of the purchase price of the home. This means for a $200,000 home, you should have $40,000 saved up. You will also need some cash or credit for home renovations and even cosmetic things, such as new paint, a new back-splash in the kitchen, or new faucets. If your financial goal is to rent a home, you should also determine if there will be a monthly association fee or any other associated costs with renting the home. These fees could include a maintenance fee, a pest control fee, or a parking fee.
Action steps are important to keep you moving in the right direction. You should also review these action steps every three or four months to make sure you are working on them and continuing to move forward. You should also review the steps and determine if anything needs to be adjusted due to a change in circumstance – new debt, a child, or any other circumstance. The following are some action steps you can take to move toward your financial goals:
- Review your list of assets and debts and decide how to pay down debt. If your minimum monthly payments are unreasonably high, you may need to consider bankruptcy as an option. If you can pay down your debt, you want to pay as much as you can to paying down your debt each and every month.
- Create a spending plan. Make sure your spending plan includes all of your expenses, whether they are monthly or not. Include your car insurance, pet supplies and veterinary care, summer camp expenses. Decide where you have to spend your money and decide would like to spend your money. The sooner you can pay down your debt, the sooner you can start putting more money aside for your dreams and other financial goals.
- Create a savings plan. A good rule of them is to put 10% of each paycheck into a savings account. If you receive bonuses, overtime pay, or a tax refund, try and store the money aside without touching it. This will help you create an emergency fund for expenses such as car repair, home repair, or a medical emergency. Life will always have an unexpected event. Plan accordingly.
- Keep your expenses low. If your goal is to pay off your mortgage in five years, you may not be able to get a new car every two years. Prioritize what is important and keep the rest of your expenses low. This does not mean that you cannot dine out three times a week, but maybe you can give up cable in order to keep your expenses low. I live in Florida and air conditioning is non-negotiable. For me, that means I might not dine at restaurants as often during the summer because my electric bill will be higher. Using the grill is an added bonus!
- Set yourself up for a great credit score. Great credit can help you with lower interest rates on mortgages and car loans. Great credit can help you open up a new credit card in case of an emergency expense. An attorney friend of mine had both his and his wife’s cars totaled during Hurricane Irma. Because of his great credit, he was able to finance two cars before the insurance checks arrived. When the insurance checks arrive and are used to pay down the newer car purchases, he will keep his phenomenal credit going.
- Include a significant other when the time is right. Only you can know when the right time to incorporate a significant other into your financial goals is. A good rule of thumb is that a conversation about financial goals should take place before a wedding. It should also take place before you open a joint account or pay bills together. Good communication and a joint plan will certainly help a relationship.
- Be open to changing up your plan. Life will change your direction more than once. Be open to the change. Review your financial game plan and decide what needs to change. Do you need to decrease saving to address a new expense? Can you increase the amount you pay towards your mortgage every month because of a promotion? Do you need to cut expenses because of a hospitalization? Adapting your financial game plan to your current needs is important.
Feher Law is happy to meet with you to discuss your financial game plan and determine if a pay down schedule or bankruptcy may be in your best interests. Feel free to call our office to learn more or to schedule your assessment.