Setting goals for your money is the first step in designing a sound financial plan. Whether you hope to save and invest enough to retire early or simply need to build up an emergency fund, the right financial strategy can strengthen your efforts in reaching those goals. If you need some direction on which tactics work best, here are 10 ways to improve your odds of achieving financial success. However, if you’re thinking about a new financial roadmap for yourself you may want to enlist the help of a professional financial advisor to help craft the right one.
1. Start With a Written Plan
Having a clear plan for your goals can keep you from going off-course. It will outline what it is that you want to accomplish. This is vital in picking a strong financial strategy so that you can see how it lines up with where you want your finances to be both now and in the future. In making your plan, remember to incorporate four things:
- A specific objective or result in you want
- A way to measure your progress toward the goal
- A time frame for achieving your goal
- The specific steps you need to take in order to reach your goal.
That last one is especially important. Outlining each action in the process can take the guesswork out of reaching your goal. And remember to write it all down. Putting your plan in writing will mentally reinforce your commitment to following it.
2. Cut Unnecessary Expenses
Once you have a written financial plan, one of the easiest ways to start making dents into that plan is to cut as many expenses as you can. This means getting rid of all the things that you don’t need in your life. It’s very difficult to reach a different financial situation if you are overspending on things while trying to make big strides in saving or investing.
Cutting unnecessary expenses is also a great practice in order to help you be more financially independent. Bad things happen from time to time. You may end up losing a job or taking a hit in the market for a short period of time. You don’t want to have to dip into an emergency fund every time something goes wrong. Instead, live well below your income so that you can make big money moves as they come up and aren’t hurt when something goes wrong.
3. Consider Focusing on Short-Term Goals First
You likely have both short- and long-term money goals in mind, but prioritizing shorter-term goals could give you a momentum boost. They typically require less effort so you won’t get burnt out.
For example, you may be deciding between starting to invest or paying off the last few thousand dollars you owe in student loan debt. Focusing on the debt might mean delaying your investment plans a little longer but it’s a trade-off you may be willing to make if you’re ready to ditch those loans for good.
4. Build Money Goals Into Your Budget
It’s one thing to say that you want to save a certain amount of money or pay off a certain amount of debt; it’s another to actually do it. Building your budget to be inclusive of your goals, rather than focusing just on spending, will ensure you put money toward your goals consistently every month.
Try adding a separate budget category for saving if you haven’t. If you have multiple savings goals you’re working towards, you could break each one down into its own category. Assigning every dollar in your budget a task prevents it from slipping through the cracks.
5. Put Financial Goals on Autopilot
Automation is one of the best tools for managing money and making progress on your financial plan. When you have automatic transfers scheduled from your checking account to a savings account, for instance, you can watch your money grow without doing any heavy lifting or getting tempted to spend it elsewhere.
Automation can also be beneficial if your goals involve debt repayment. Setting up biweekly automatic credit card payments can help you whittle away at the balance while limiting the likelihood of late fees or negative marks on your credit report.
6. Leverage Free Money
Employer-sponsored retirement plans and Health Savings Accounts (HSA) offer something that may seem impossible: free money. Taking advantage of matching contributions on these types of plans is a simple way to accumulate savings faster and reach your money goals sooner.
If your employer offers them, make sure you’re contributing to a sponsored retirement account and HSA. Then, check whether your employer will match your contributions. Consider raising your elective deferral rate so that you receive the full employer match.
7. Understand the Value of Time
The sooner you begin working towards your savings and investing goals, the better. For example, the best time to begin saving for retirement is as soon as you get your first job. An individual retirement account can help you grow your savings on a tax-advantaged basis whether your employer offers a plan or not.
The second best time to start pursuing a money goal is right now. The longer you wait, the less you can earn in terms of compounding interest.
8. Diversify Your Investments
By diversifying your investment portfolio, you can manage risk while keeping your goals in sight. It prevents you from allocating too much of your portfolio to a certain type of security and shortchanging your return potential over time.
You can apply that same principle to your saving vehicles, too. By keeping funds in a range of high-yield savings accounts, CDs, money market accounts, tax-advantaged accounts and taxable accounts, you can achieve different rates of return with varying degrees of risk.
9. Increase Your Cash Flow
Another financial strategy for reaching your money goals is increasing the amount of income you have to put towards them. There are several ways to do this: asking for a raise at your current job, angling for a promotion, working a part-time job or starting a side hustle.
As you determine how to increase your income, consider which avenue would yield the highest return on investment. Working an extra 20 hours a week at a part-time gig in addition to your regular 40-hour job may not be worth the time if it only marginally raises your cash flow.
10. Get Professional Financial Advice
Sometimes it can be helpful to have an outside perspective on your money goals. If you are struggling to determine the right strategies and steps to reach your goals, consider speaking with a financial advisor. An advisor can help you assess your current financial health and set realistic goals for the time and assets you have. And if you ever veer off-course, they can help you get back on track.
The Bottom Line
Overall, a strong financial strategy that helps you reach your goals is going to depend on what those goals are and what your current financial situation is. The right strategy for you will focus on sound financial principles while helping you improve your overall savings for now and for retirement. It’s imperative that the financial strategy you decide to move forward with is one that is specific to your situation.
Article courtesy of Smartasset.com