You’ll Be Glad You Asked Yourself These Three Financial Questions
Effective personal financial management accounts for a wide web of monetary concerns, representing a formidable undertaking for consumers of any age. And though we all face similar concerns, at one time or another, personal finance is a highly individualized responsibility. Not only do some families have greater access to resources than others, but financial decisions are also shaped by values and personal ambitions, which vary from person to person. In a larger economic sense, we are all in it together, yet daily concerns are unique to each one of us.
With each person committed to distinct financial goals, the best path to financial success may not be the same, in each case. The key to finding your fast track to fulfillment is identifying financial priorities and establishing a focused plan for achieving goals.
How important is home ownership to myself and family?
Owning a home was once held-out as an essential feature of financial success. In fact, there are a number of benefits associated with ownership, versus renting a home. Still, home ownership isn’t for everyone. For starters, real estate is not a passive investment – buying, maintaining, and improve property is hard work. Condos, flats and apartments, on the other hand, are administered by landlords, drastically reducing the amount of time residents spend addressing domestic duties.
Identifying a preference enables you to plot a course in the desired direction, satisfying your expectations in the most reasonable, timely ways possible. If ownership is a closely held priority, several steps will set you on the right path:
Save for a down payment – Establishing a designated account for building a home down payment can help you set-aside resources faster than pulling cash from your regular household cash flow. Depending upon the programs for which you qualify, your credit strength, and other factors; a down payment of twenty-percent may be required in order to initiate financing.
Study the local real estate market – Real estate markets ebb and flow, responding to demand and other economic forces. To make the most of your investment, study trends ahead of your home purchase, giving you the tools needed to make informed, cost-conscious buying dictions.
Explore financing options – Purchase price is an important concern for home buyers, but it is not the only financial matter would-be buyers must reconcile. The cost of financing represents a substantial share of the ultimate cost of your home, so landing the best available terms can save tens-of-thousands in interest payments, over the life a mortgage.
Where do I see myself in five years?
This classic job interview question has forever thrown young people off course, challenging them to think ahead, on the spot. Applying the same question to your financial life helps illuminate priorities – regardless of where you are in your financial progression.
For the best results, account for major milestones first. Are college costs looming for one or more children? Do you expect income changes as a spouse leaves the workforce to provide child care? Is self-employment in your future, requiring entrepreneurial capital? Answers to these important questions give you near-term benchmarks to pursue, and a five-year plan provides a realistic time frame for adequate financial planning.
Are my retirement needs covered?
It is never too early to start planning and making financial moves in preparation for retirement. Although each person’s financial circumstances are unique, advisors promote savings and retirement thresholds consumers can use to guide investment decisions – how money should be allocated at a particular age, how to evaluate risk tolerance, etc. As you assess preparedness, use these strategies to make the most of your retirement resources
Maximize employer benefits – Retirement benefits are part of your compensation package, so it is essential to make the most of employer contributions. Maximize matching programs such as your 401K, for example, to make your money grow faster; and take advantage of any stock purchase and profit sharing plans offered at work.
Educate yourself about financial products – Pensions and savings accounts are not the only ways to put-aside retirement resources. On the contrary, annuities, tax-deferred IRAs and other financial products cater to the needs of would-be retirees, at all income levels. The more you learn about investing and economics, the more control you have over your financial destiny.
Seek professional help – Some investment advisors sell mutual funds and other investments, so they are biased, to a point. As a rule, consult with more than one financial professional, before making long-term commitments. And once you’ve bought-in to retirement investments, check performance and periodically review your account with your financial representative.
The most successful financial planning efforts start with well-defined goals. By identifying priorities and answering a few questions about your financial ambitions, you’ll succeed faster, without wasting steps.
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