Get Even More Visitors To Your Blog, Upgrade To A Business Listing >>

How To Do Proper Financial Planning For 2020 To 2025?

In real terms, Financial planning is something that stays with you for life from the moment you gain independent control of funds, no matter how big or small.

Financial Planning

Why We Need To Set Financial Goals

Most people have certain financial goals that they want to achieve in terms of lifestyle, security, and retirement. While some of these, such as retirement, may not be clearly defined or exist in a nebulous form somewhere at the back of the mind, some are more concrete.

As our lives change with the addition of a family and our aspirations, it’s important to analyze our own attitudes towards the future and how we want to live when we’re unable/unwilling to work due to our preferences, age, disability or ill-health.

Achieving your financial goals takes a certain amount of hard work, persistence, and, most importantly, planning. Without a firm plan in mind, time could pass swiftly, and before you know it, a large slice of your income-earning period passes with precious little to show for it.

Setting Financial Goals

While planning your financial future, you can set aside some time to assess your current situation. This can be done by asking yourself some important questions:

  • What is your income?
  • How much more do you hope to earn in the next few years?
  • Do you have debts?
  • How much debt do you have?
  • How do you plan to repay?
  • When do you hope to be free of all current debts?
  • What kind of emergencies do you foresee in the next few years?
  • How much money would you need to meet them?
  • Do you have major life changes coming up in the next few years such as education, marriage/divorce, health care expenses, dependents, children, purchasing property, etc.
  • How much money can you put aside to meet these expenses?

Once you have some answers to most of these questions, they can form the basis of your financial plan.

Benefits of A Five Year Plan

A five year financial plan is a targeted strategy to achieve certain goals that you can achieve in the next five years. This is different from an immediate/short-term goal or a long-term one that you hope to achieve in about 10-15 years. In that sense, it is a midway point that takes you past your immediate concerns and puts you on track to get to your ultimate financial objectives.

You can cover a lot of ground in five years. Usually, these plans are made when you’re between 35-40 years of age, on a well-charted career path, have a stable personal relationship, perhaps you already have or plan to have children, are interested in purchasing property and building a nest egg for the future.

Five-year financial plans help you get rid of your debts, build a substantial corpus for emergencies, save for big ticket down payments, and build a healthy and respectable credit score.

It also gives you the flexibility to make changes of a plan if you need to. For instance, if you lose your job, decide to start a business, take a sabbatical or make a major career switch, five year plans help you make smoother transitions.

Planning for 2020-2025

With the pandemic crisis raging across the world, it’s a difficult time for most people, no matter what their financial status. There is very little certainty about how the future will pan out, what sort of expenses you will have, and what kind of income you could hope to earn.

However, it’s also important to realize that important milestones in life would still pop up at the designated times. Retirement, college, marriage, children, buying a home, etc. still need to be financed whatever else is happening in the world. Don’t let the uncertainty lull you into thinking that these things would be put on hold. It is at times like these that you need firm control over your money. This will give you a sense of confidence and security.

  1. Deal with immediate issues:If you’re facing job uncertainties or taking a substantial pay-cut, meeting monthly expenses could be the real crisis in front of you. Ensure that you deal with this problem as best you can, and put other big ticket plans like saving to buy a property or contributing to a college fund for your five year old on a lower priority. If you have a retirement plan provided by your employer on a 401 (k) plan, continue with it, because this will certainly benefit you in the long term.
  2. Prioritize your Emergency Fund:You and your family/dependents may face hard times in the immediate aftermath of the pandemic, with jobs being hard to find and fewer opportunities for travel. Protect yourself against economic uncertainties by building a safe and secure investment that can serve as an emergency fund when you most need it. You can save money by working from home at multiple jobs, sell off your second car, look for reliefs in mortgage and car payments, stave off retail-therapy cravings.
  3. Review your budget: With major changes sweeping across the world, review your family budget, assess where the money’s going in this new situation, and where it’s coming from. You may find that you’re saving on travel, commuting, gas, parking, subway fares, eating out, etc. This money can be funneled into your emergency fund. Refinance your mortgage because the Federal Reserve has cut rates.
  4. Figure out the difference between Roth IRA and Roth 401k:Planning for retirement should start as early as possible. There are various options available to you. Roth accounts enable tax-deferred growth of savings. A financial expert can help you to understand the difference between Roth IRA and Roth 401k. Roth 401 (k) does not have an income limit like Roth IRA so that high-income earners can contribute more. Employers get tax-incentives to contribute to Roth 401 (k) plans, and employees can take a loan based on age criteria. The major differences include eligibility criteria, annual contribution limits, and the ability to take minimum withdrawals.

The post How To Do Proper Financial Planning For 2020 To 2025? appeared first on .



This post first appeared on Personal Finance, please read the originial post: here

Share the post

How To Do Proper Financial Planning For 2020 To 2025?

×

Subscribe to Personal Finance

Get updates delivered right to your inbox!

Thank you for your subscription

×