Your employer will match your contributions up to a certain level and that is money for nothing. If there is not a 401(k) scheme in place, suggest one.Read more
Budget & Financial Goal Relation
Even though the recession is still a fairly recent memory it seems that too few Americans have learnt the lesson. The level of credit card debt is truly disturbing. There is a significant number of Americans carrying credit card balances forward month after month. Within that number the average debt is over $15,000. At the same time around 30% admit that they have little or no retirement savings despite the commonly accepted fact that the Social Security System is unlikely to ever pay out sufficient benefits to be ever more than support in retirement. The argument for getting a budget in place as a matter of urgency is overwhelming.
The only effective way to plan your future finances to achieve your lifetime goals is to prepare a budget that reflects your current circumstances and the way you intend to manage them in the weeks, months and years to come. It does involve listing all your income and expenditure down to the smallest detail. You might be surprised how much that little detail of daily spending adds up over a month. You may be travelling to work and buying breakfast before you arrive? Perhaps you go out to buy lunch from one of the fast food sellers? You need to reflect that in your budget as well as the household spending that includes food and other consumables.
Your regular monthly costs should be included and then you are almost there except the reason for your budget in the first place is to plan for the future, short term and long term goals. That means creating a surplus that will begin the process. Whether you can increase your income or reduce your expenditure the net effect will be the same; more money to set aside for your goals.
Surplus is the key. It is the only way to save towards some long term goals:
- Good retirement provision. As already mentioned Social Security was never designed to fund retirement. Indeed with a significant injection of more funding benefits could fall by as much as 25% by 2030.
- An emergency fund though the sooner you can accumulate such a fund the better because the unexpected can occur any time.
You may have pressing financial problems such as debt that is incurring a high rate of interest. That is dangerous and can affect the changes of your achieving your long term plans. If you are carrying credit card debt you will be paying a high rate of interest on the month end balance that you do not clear. You should pay the balance off in full by getting a personal loan which will be comfortably cheaper in terms of interest rate so
If you are fairly young and about to embark on marriage and a family then there are financial implications that must be reflected in the goals you aspire to and the budget you prepare for the coming months.
You should have set your goals before preparing your budget. You have to have an idea of what each of your goals will cost you and the time involved in reaching there. Retirement planning very much depends on your age; if you are just setting out on a career and the economy continues to grow you should be able to estimate your possible earnings in the years to come. In any event you must decide on a monthly amount to save and have the self-discipline to stick to that. If your employer as a 401(k) facility in place then grasp it with both hands.
As for an emergency fund you should set a target that is not too far away in terms of time and hope you never have to use it.
If current debts are an obstacle, as described above relating to credit cards, then they must be addressed immediately with the first budget you prepare. Obviously any payments that you are being made to service those debts will be in the expenditure list. They may form a substantial part of your expenditure. That problem may force you to think about whether you can do anything about your long term goals until those debts have gone.
It does not mean that all debt is bad with property a very realistic way of building up your assets for use in the future.
It is not always easy to fit your finances with your goals and if you have never prepared a budget before then it may take you some time to get it quite right. It needs perseverance and flexibility to do this but the time is well worth it. If you are currently living from pay check to pay check without thinking about the future there will be trouble ahead. Think about this seriously and act.