Take Control of Your Finances: The Importance of Financial Planning Month

 

Six Tips for National Financial Planning Month

October is National Financial Planning Month.  With the holidays approaching, National Financial Planning Month is a great reminder to review (or create) your financial plan and take steps to improve your overall financial health.

Think long term instead of immediate

A financial plan is a road map for how you will manage your money so that you can reach your future goals.  Don't worry if you don't have a financial plan.  you are not alone.  Countless studies have shown that people are forced to prioritize immediate gratification over long-term achievement.  For example, a study in The American Economic Review found that when offered a choice between $30 now and $150 in two years, most people chose $30 right away.  While it's nice to indulge in instant gratification once in a while, overeating can lead to poor financial, social, and health outcomes.  Planning ahead can lead to big wins and reduce your stress in the long run.  And it's never too early or too late to start.

Create or review your financial plan

Creating a financial plan doesn't have to be complicated—you can develop one on your own or consult a professional.  Start by thinking about your short-term financial goals. Do you want to get out of debt?  Do you want to spend less this holiday season?  Set your long-term financial goals now, Do you want to earn money for your children's university? Do you still want to retire at a certain age?  In general, you should have a clear picture of your income, spending habits, and savings.  Here are five easy tips to get you started.

Write your goals in the short, medium and long term

Motivate yourself by writing three different types of goals.  First, set some smaller or more immediate goals, like creating a budget, paying off debt, or saving for a vacation. Medium-term goals might include saving for a house, starting a college savings plan for your kids, or paying off your student loans.  For most people, the biggest long-term goals are saving enough for retirement and developing a long-term care plan.

Track your finances and start budgeting

Now that you've set some goals, you can achieve them by tracking your monthly expenses and finding ways to save and budget.  Free budgeting apps like Mint make it easy to connect and view all your accounts in one place, create smart budgets, and even monitor your credit score.

Keep checking your plan

Once you've established your financial plan, it's important to review it regularly and make any necessary adjustments.  A good rule of thumb is to review your financial plan several times a year and after any major lifestyle changes, such as a move, a new job, marriage, or children.

Plan for the unplanned

One thing is for sure, your plan will not turn out exactly as you planned.  Make sure you're covered to start an emergency fund, get the right insurance, and protect yourself and your family from identity theft.

Save for retirement

While retirement may seem far off, building wealth takes time.  Make sure you put yourself first in the future by optimizing your contributions and taking advantage of any employer benefits.