A Financial Plan is Like a Good Road Map
A good road map should tell you where you're going, which road to take, alternate routes, what you might see along the way, and when you'll get there. Your financial plan should do the same! Before you begin your financial journey, you need to know where you want to go. Ask yourself these questions:
- What are your financial goals? Do you have life insurance, and is it enough? What is your time horizon? Are you saving to buy a cottage property in the next five years or for your retirement in 25 years? What is your risk tolerance?
- Do you know how to reduce the taxes you pay now?
- Make sure you write down your financial plan. This way you can revisit your goals regularly and stay focused.
Get Your Finances in Order
The first step in any financial plan is to get your finances in order. Do this by:
Setting a goal to reduce your debt load:
- Don't carry a balance on your credit card. Reduce long term debt such as car loans, line-of-credit. Pay off your mortgage.
- Consolidate any small or short-term debts.
- Setting up an emergency household fund.
- Starting a monthly savings plan: Pay yourself first, set aside 5-10% of your before-tax income each month.
I want to set aside money every month to save, but can't seem to find the money. What can I do?
List your monthly expenses and look for areas where you can save money. If you can, renegotiate your mortgage or line of credit at a lower rate. Pay off your most expensive credit card balances first. Make sure you're maximizing all of your income tax deductions. Take public transit or carpool at least once day a week to save on gas and maintenance costs.
Add every dollar you save through these ideas to your monthly savings plan. Remember, no amount is too small. Even saving $25 or $50 a month can grow to substantial amounts over time.
