What Are the Components of a Solid Financial Plan?
Successful long-term financial planning in 07663 can help you pay your bills on time while saving more money. However, before this can happen, you’ll have to come up with a solid financial plan that includes several critical components.
The Critical Components Your Financial Plan Should Include
Your Financial Goals
Before anything else, you have to know what you intend to accomplish with your money. Once you’ve covered this, the next step is to establish your short, medium, and long-term financial goals. If you want, you can choose to organize your goals by how soon you’ll be needing the money.
While short-term goals are those you hope to meet within the next five years, your medium-term goals are those you plan to achieve within the next five to 10 years. On the other hand, long-term goals are those that you plan to meet after 10 years.
Each of these goals has to have its own target dates and a dollar figure to make it easier for you to measure your progress toward them. You may want to explore some online tools that can help you run the numbers and determine the best course of action.
Your Net Worth Statement
Since your financial plan should have a baseline, you must make a list of all of your assets and all of your debts. Your assets include real estate, bank, and investment accounts, and valuable personal properties. Moreover, your debts include your credit cards, student loans, and mortgages.
You can calculate your net worth by subtracting your liabilities from your assets. Don’t worry if your liabilities far outweigh your assets. Experts confirm that this is usually common among people with student loans and mortgages while they’re just starting out.
Your Budget and Cash Flow
You have to get a clear snapshot of where your money is going and the necessary adjustments you have to make to meet your goals. In other words, creating a budget and cutting back on your expenses can help you plan wisely.
You may choose to use a budget calculator to make sure that you can keep track of your irregular but important expenses that include real estate taxes, out-of-pocket health care costs, and car repairs. Be sure to identify your must-haves and your nice-to-haves.
Figuring out how your goals can manage to fit into your budget will require you to pressure-test them with the use of several ‘what if’ situations. These may include certain scenarios that involve downsizing your mortgage or retiring earlier than you initially planned.
Identify high-interest consumer debts and come up with a plan to pay them off as quickly as you can. Keep in mind that your other debts, such as your mortgage, can be useful in building equity and boosting your credit score. Figure out how much of your budget should go toward your monthly debt payments.
You have to figure out what you may need in retirement. Keep in mind that even if you’ve already paid off your mortgage and your children will be financially independent by then, you’ll still need about 80% of what you currently earn in retirement.
You should also think about your final wishes pertaining to your assets, dependents, and the person you plan to administer your estate. Keep everything up to date, including the beneficiaries of your retirement accounts and insurance policies.
Need Help with Long-Term Financial Planning in 07663?
At 1879 Advisors, we’re ready to help you ensure smooth financial sailing once you’ve decided to retire. Contact us now to schedule an appointment with our team of experts.