3 Steps to Get Your Financial Life on Track
As most everyone understands in theory, it is smart to be prepared for anything in life -- whether it occurs personally, financially or professionally. The unexpected happens to people just like you and me every day.
But for many, good financial preparation, including establishing and maintaining solid financial habits or retirement readiness, isn't as easy as it sounds.
According to the Voya Retire Ready Index, only 17 percent of workers have a formal written financial plan, while nearly half (48 percent) have less than $49,000 in retirement savings. The study, which focuses on the retirement readiness of workers and retirees, found that 27 percent of retirees and 59 percent of workers were extremely or very concerned about outliving their savings.
Given these concerning statistics, how should you become financially prepared? Here are three tips that can help get your planning and saving on track.
Establish (and write down) your financial goals. Planning involves setting short- and long-term goals. It also involves investigating different ways to reach those goals. You need to explore and be open to different options when planning to have the best outcome.
Ask yourself: What are my financial goals? Do you want to make a big purchase in the near future, such as an engagement ring, house or a child's braces? For those closer to retirement, you may be thinking about a goal of retiring by age 65 with a certain amount of money saved.
Most of us are on a quest to become financially independent, but many lack the planning know-how to get there. Writing down your goals is a great first step.
Prepare a budget. The best way to establish a budget is, quite simply, to start keeping track of your money. Track your income, expenses and savings for two to three months, and then analyze the numbers to see how you are doing. While a budget may be easy to establish in theory, it can be difficult in practice because execution requires dedication and can involve cutting back on spending.
There are plenty of tools that can help you, such as online home budget calculators. Find resources that work for you so you can accurately track where your money is going and determine where you can save more.
Don't forget to aim to align your spending and saving with your long-term and short-term financial goals.
Understand your emotions and money. The path to financial preparedness isn't easy, and there are many unexpected turns. Since you'll experience ups and downs, it helps to better understand how you react to money issues.
Money is such an important part of our lives because it affects our relationships, career choices, education, family, retirement, charitable giving and much more. A lack of money can place us in vulnerable situations, which can lead to emotional, knee-jerk actions and make the situation worse.
It's important to know what it takes to rattle our own emotional cage. It could be a sudden drop in the stock market, a large, unexpected bill, conflicting financial priorities or something else. Once you identify your emotional trigger spots, you can create a plan to steer yourself away from making bad decisions in crunch times.
Despite the financial world becoming more complicated, the way to financial independence still remains pretty straightforward and simple. Save, plan and get professional help when you need it.
Above all, to achieve your financial goals, choose the right path for you and stick to it. Being financially prepared doesn't happen overnight. It's a journey with many opportunities to revisit, adjust and then march forward to financial security.
Jacob Gold is a Voya Retirement Coach, a third-generation financial adviser and President of Jacob Gold & Associates Inc. He is the author of the upcoming book, "Money Mindset: Formulating a Wealth Strategy for the 21st Century" and "Financial Intelligence: Getting Back to Basics after an Economic Meltdown," which was published in August 2009. Gold is a certified financial planner practitioner and is Series 7, 24 and 66 securities registered. You can connect with him on LinkedIn.
Securities and Investment advisory services offered through Voya Financial Advisors Inc. (member SIPC).
Jacob Gold & Associates Inc. is not a subsidiary of nor controlled by Voya Financial Advisors.