Do you have a financial plan? Apparently, most people don’t, according to an old friend who’s a regional branch manager at one of the world’s largest banks. He’s talked to thousands of retail banking clients and seen their bank statements over the past 15 years. What he’s noticed is that a lot of people, especially those in their 40s and 50s, are just getting by, living paycheck to paycheck without a plan for retirement. Many have less than $10,000 saved up.
These folks often visit the bank, ask about interest rates, and if they’re not appealing, they simply walk away without considering investing or finding other ways to grow their money. They rely on Social Security and hope that it will be enough.
However, hope is not a strategy, especially when it comes to money management. It’s essential for everyone to have a financial plan.
So, why don’t more people plan? It often comes down to not knowing where to start and the lack of immediate rewards, which leads to procrastination. Here’s a straightforward three-step approach to help anyone begin to financially plan their life:
1. Start by listing financial goals with specific ages in mind. Setting an age gives you a deadline, creating a sense of urgency. Here are some example goals:
– Graduate college by 22
– Buy a home with a 20% down payment by 28
– Save $100,000 by 30
– Pay off all student loans by 33
– Get married by 35
– Have children by 38
– Achieve a $500,000 net worth by 40
– Develop three income streams of $50,000 each by 45
– Pay off the mortgage by 55
– Reach a $1,500,000 net worth by 60
2. Assess your current financial status against your goals. For example:
– If you’re 25, have saved $30,000, and want a home by 28, you’re halfway to a 20% down payment.
– At 33 and just casually dating? You might be off track for getting married by 35.
3. Prioritize your top three financial goals and create specific action steps to address any shortfalls. For instance:
– If you’re aiming to buy a $300,000 home by 28 with a 20% down payment plus a 10% buffer, you need to save another $60,000 over three years. This means setting aside $20,000 a year outside of retirement accounts.
Developing a financial plan is about more than just numbers; it’s about setting a course for your future and taking control of your financial destiny. Don’t leave your future to chance. Plan now, and adjust as necessary along the way to meet your financial goals and reduce stress about money.
