Are you a planner? Or do you prefer to fly by the seat of your pants?
No matter what type of person you are, it’s always smart to create a financial strategy. This strategy should be specific to your needs and your personality.
And it’s not hard to do as long as you follow a few simple rules.
In this article, we’ll put the power in your pocket and show you how to create a winning financial strategy. Let’s get started!
If you’re not a fan of goal setting, it’s time to get serious about it. The first step in your financial strategy is to set your financial goals.
The key to setting goals is to keep things simple. Overthinking things will get you discouraged. And you may end up quitting before you even start.
You might be tempted to start small, but instead, we encourage you to dream big when setting goals. Do you want to own your home free and clear one day? Do you want to take a month-long European vacation before you’re 50 years old?
Once you’ve determined your goals, write them down and take a hard look at them. Put down an exact dollar amount for how much money you believe you need to reach this goal.
It’s okay if you don’t know for sure. An estimate is better than nothing. And you can always amend your goals later as your finances improve.
For each goal, write down five ways that reaching this goal will benefit your life. Then print out your list of goals and benefits. Keep it where you can see it and refer to it often.
Getting your goals in order gives you the motivation you need to stick to a financial strategy for the long haul.
Scout out Your Spending
You’ll never know how you to reach your goals if you don’t start with your current spending habits. We suggest taking the next two months to thoroughly scout out where your money goes.
Be honest! Keeping tabs of your cash reveals your good financial habits. And shows you what you need to work on.
We suggest setting up a simple spreadsheet. Include these major expense categories:
- Utilities & Necessities (phone, electricity, medical insurance, etc)
- Fuel and auto expense
- Mortgage (and all associated home expenses – property insurance and property taxes)
- Entertainment (and other miscellaneous expenses)
- Loan payments (not including home and auto – motorcycle, boat, ATV, etc)
- Current savings
After two months of keeping track, you’ll have a more accurate picture of your average expenses. This will help you build your budget.
Build a Budget & Stick to It
Now sit down with your tracking sheet and input your gross monthly income.
Your financial goals should center around finding ways to pay off debt and save money for the future. So your budget should reflect those goals. Break down your goals into bite-sized chunks and implement those changes into your monthly budget.
So often we don’t realize how much money we spend on entertainment or groceries until we see it on paper. Or you might not realize how little you’re putting into long-term investments.
Focus on paying off the debt with the highest interest first. Once that’s done, put that additional money toward savings and investments focused on yielding solid returns.
Hold yourself accountable to your budget. If you only plan to spend $50 per month on entertainment, stick to it no matter what.
Start on Your Financial Strategy Today
A key to a sound financial strategy is consistency. Refer to your goals sheet when you start to doubt yourself. Remember all the ways that reaching your financial goals will benefit you.
At Dayton and Sydney, we’re here to help you reach your financial goals. No matter how big they are! Contact us today to speak with one of our experienced financial professionals.