Everyone enjoys their first pay check and many enjoy their last, the time for a comfortable retirement after many years of working each week to support the family and pay the bills. What happens in between varies from person to person. Those who have understood the need for managing their finances well from the start are the ones most likely to be able to smile when they finally retire. Life expectancy is increasing everywhere and everyone should aim to extend their final years in relative comfort and to do that they need to set themselves goals.
Inevitably some financial targets are short term. They will include paying off a loan that might have been used to fund education while from time to time unexpected bills come in that need urgent attention. Longer term goals obviously include retirement but for the younger generation, it is also likely so be something like being able to buy their own home.
So much depends on your age as to where you should start. It is clear that a single man in his 20s is likely to have different priorities from a family man in middle age or a couple approaching retirement. Whatever your circumstances the first thing you need to do is to write down your goals without at this point putting them in any real order; you can do that later once you are happy with your list of financial targets.
- 20 years and single, you are beginning to earn money and you may have some education bills to settle and new monthly expenditure because suddenly you are an adult and independent.
- Married and middle aged with a growing family, hopefully you are well established in your career and able to meet all the bills that are coming in with a little surplus left over. You need to agree with your wife about how you are going to tackle the future.
- A couple close to retirement needs to look at their finances and ensure that they are not carrying debt that will continue into the years of retirement. That will be something that will be increasingly difficult to settle.
Some goals may be more realistic than others. The obvious ones that do not apply to everyone:
- A new home.
- A retirement fund.
- An emergency fund to handle any unexpected bills.
- Education funding for the children.
- A lovely holiday.
Some of those things require a long term commitment yet that type of commitment is needed if you are to be in control of your finances. If you are committed and self-disciplined then while you are progressing towards your long term goals you may find that you can actually take one of your short term ones, that dream holiday and create other short-term ambitions because of your success.
Get Ready for the Detail
However, you need to go back to the detail before thinking that you are on the right track. The detail involves the amount of money you will need to save on a regular basis to achieve any of your stated goals. You have to be realistic and estimate a timescale in each case. It is only when you have dome that you can go to the next stage of organising your financial future. You can take your time, days, even a week or two, until you are happy you have everything ready for your analysis and the decisions you need to make.
When you look at the detail there may be something that is almost jumping out at you from the page? Too many people are living with expensive debt; credit card balances where they are only paying the minimum that the card company requires and then having a high rate of interest applied to the remainder. It is a sheer waste and an obstacle to good financial management. Credit cards were designed for convenience yet they have proved to be extremely tempting; they allow people to buy things on credit when they cannot really afford them. The real cost of a purchase becomes far more than the figure that appears on the credit card statement. The true cost has to include the interest that accumulates over the coming months until it is paid for in full.
Clear your Existing Debts Initially
Whatever your age you have to settle any debts you have at the outset. Your mortgage is likely to be the exception. Such a long term loan is likely to be helping you to build your assets because real estate will grow over the medium to long term so it is justifiable. What is not justifiable is expensive debt such as that on credit cards. You should look at realistic personal loans which should be available, even if your current credit score is poor. The rate of interest you will be charged is always much lower than the rate you will be charged on your balance. Pay off your balance with a personal loan and resolve not to ever build up a balance again. That is an excellent starting point for your plans to live a much more responsible financial life.
Whatever your age it is never too late to improve your future prospects. Certainly, if you are beyond middle age you will be about to face financial issues in retirement. That is not a reason not to act. Every little helps.