If you’re experiencing an unexpected event that calls for cash you don’t have, you need a loan. Since a bank loan is out of the question, you’ll need to know the difference between payday loans and title loans (title loans generally carry a lower interest rate and you can borrow more).
Once your emergency is out of the way, it’s time to plan for your future stability. If you aren’t specific about what you’re working toward, you’re liable to spend more than you ought to, and not have enough to cover unanticipated events or retirement. You’re more vulnerable to life’s major risks.
Financial and retirement planning should begin with goal setting. Here’s what you should know.
Short-Term Financial Goals
These goals give you the basis and momentum boost you need to achieve larger, more time-consuming goals.
- Establish a budget. You need to know where your money is going, so that you can find ways to cut back. Using a spending tracker such as Mint, you may be surprised at areas in which you can cut back. Maybe you can eat out less, for example, or cancel those underused subscriptions.
- Build an emergency fund. Life comes at you fast, and there will inevitably be pricey car repairs, broken cell phones, or other bills with which you must contend. If you have to pull out the plastic each time, you’ll find yourself in a constant loop of debt that will hamper your ability to achieve your larger objectives. Aim for $1,000 to start, building to six months’ worth of living expenses.
- Eliminate credit card debt. While you’re creating an emergency fund, pay off those credit cards. You can use the debt avalanche method, in which you make only minimum payments on all but your highest-rate obligation. Any extra funds can be used for extra payments on that card. Another method is called debt snowball. That’s when you erase debts in the order of smallest to largest.
Mid-Term Financial Goals
Goals here will serve as a bridge between your short- and long-term financial objectives.
- Get proper insurance. If you have a spouse or dependent children, you need to get life insurance to protect them should you die prematurely. You should also have disability insurance to protect your pre-retirement income. If your employer doesn’t provide it, you can buy it.
- Pay off student loans. These loans ding many people’s budgets. Reducing or eliminating those payments can free up cash for retirement and other goals. You may want to refinance your loans into a new loan with a reduced interest rate.
- Consider life goals. You may want a new home or a renovation of the one you have. Figure out how much you need to save to get there. Think about the kind of future you want.
Long-Term Financial Goals
- Save enough to retire. For most people, this is the biggest long-term goal. A common strategy is to save 10% to 15% of each paycheck in a tax-favored account such as an IRA or 401(k) account. But to be certain you’re saving enough, you should determine how much you need to retire. A financial planner can help you with this.
- Increase retirement savings. Many employers will match a portion of your contributions to your employer-sponsored retirement plan. This is essentially free money, so take advantage of it.
Financial and retirement planning are crucial for your future financial stability. And the earlier you start, the better. Setting short-, mid-, and long-term goals will give you peace of mind and allow you to enjoy your retirement years.
