Hola bellas! Did you know that “you become 42% more likely to achieve your goals and dreams, simply by writing them down regularly”? According to Dr. Gail Matthews, a psychology professor, it truly works! It’s great news because aside from setting general life goals, you can also set some specific financial goals too. To do so, you can create a financial plan.
A financial plan is a statement(s) of one’s financial goals and details of how to achieve those financial goals. It includes one’s current economic state and future expectations. Setting a financial plan is extremely important because by listing your financial goals and details of what steps you’re going to take to achieve them, it is a lot easier to accomplish what you want. So how do you create a financial plan?
Take these steps to create a financial plan:
- Write down your financial goals
- Write down what you want to achieve. Do you want to save money for your dream vacation, wedding, college, or home purchase? Do you want to get rid of any debt? Do you want to make more money?
- Before you start working towards these goals, make sure you have an emergency fund of at least $500, then try to save at least three months’ worth of living expenses (in the case that an emergency or unexpected events happen).
- Make a note of where your money goes
- Note down the amount that you’re earning and the amount that you’re spending every month. It will help identify areas where you could be saving more/spending less.
- Get rid of debt
- Make it a priority to pay off debt. Interest rates on credit cards can be so high that you end up paying excessive amounts in interest.
- Contribute to your employer’s 401(k)
- If the company you work for has a 401(k) plan, make sure you contribute a portion of your salary to the 401(k) plan. Ask if your employer matches any percentage of your contribution. Many employers match up to 6% (for instance, if someone earns $50,00 per year, 6% of that is $3,000 per year, meaning that if the employee contributes $3,000 per year to the 401(k) plan, then the employer will match that amount and contribute up to $3,000 to the employees 401(k)). If your employer does match a percentage, make sure you contribute up to the portion that they match (ex: 6%) so that you can get the free money they are matching.
- Invest to grow your savings
- There are many investment options out there, but if you’re just getting started, mutual funds and ETFs are great options.
Once you have created your financial plan, you can always update it and change it! Aren’t you glad you learned how to create a financial plan? Now you’re one step closer to achieving your financial goals!