You Are Employed, Now It’s Time for a Financial Plan

box gift wrapped in $50 bill

I hope I’m catching you while you’re young. Maybe you’re fresh out of school and ready to work. Maybe you just landed a job and you’re, for the first time, faced with the excitement and responsibility of a paycheck.

If not; if you’ve been at this work-thing for many years, it’s not too late. An early start is absolutely ideal, but all you have is now. The nest egg will not have as many years to accumulate or work for you, but implementing a financial plan is necessary for retirement and peace-of-mind nonetheless.

So how can you begin, today, to manage your money in a way you will appreciate 5, 10, 20, or even 40 years down the road?

  1. Design and implement a budget. Follow the 50/30/20 rule. After determining your take home pay, spend 50% on needs (rent or mortgage, travel costs, groceries, insurance, bills), 30% on wants (restaurants, vacations, new wardrobe, nicer furniture), and 20% on financial goals (debt repayment, savings and stocks toward retirement). These are guidelines- you will be better prepared for the future if you can live on less and save more.
  2. Create an emergency fund. Save six months’ worth of living expenses to prepare for unforeseen expenses and emergencies.
  3. Set financial goals to prepare for retirement. Retirement is not something you can start planning years down the road; it begins now! You need to save 25 times your annual salary by the time you retire if you want to continue your lifestyle. If you currently earn $50k per year, you need to have saved $1,250,000 by retirement. Don’t take it from me, begin researching how much money you need in retirement.
  4. Don’t try to keep up with the Joneses. As financial guru Dave Ramsey says, “If you live like no one else, later you can live like no one else.” More importantly, Practice contentment instead of accumulating debt when purchasing items that don’t offer true contentment.
  5. When possible, buy pre-owned items rather than new. You’ll save money, even accounting for possible repairs on big-ticket pre-owned items.
  6. Don’t borrow money- pay cash. Billionaire and owner of the Dallas Mavericks, Mark Cuban, states (and who wouldn’t agree?!), “Credit cards are the worst investment you can make. The money I save on interest by not having debt is better than any return I could possibly get by investing that money in the stock market.” Ready for the exception?
  7. Only borrow money for necessary assets that appreciate in value. A house should increase in value over time. Therefore, when you are paying off a loan for a home, you are investing in a purchase you can hopefully resell for profit.

What would you add? I always appreciate your wise input and how we turn the topic into a conversation.