What are your financial goals?
If you are like most people, you may have a general idea of what you'd like to achieve financially in life, but you haven't taken the time to map a plan to achieve it. If you don't have specific goals, it's going to be quite difficult.
Here are several steps to putting in motion a sound financial plan:
1. Write it down: The first step is to identify and write down your financial goals so you know exactly what they are. Here are some examples of possible goals:
Eliminate credit card debt.
Pay off student loans.
Build a college education fund for your child.
Purchase a house.
Build a retirement fund.
Create $1 million net worth.
2. Set parameters
: Once you have identified and written down your financial goals, you need to define a time frame in which to achieve each one. By setting times, you put in place a motivating factor to move toward each goal at a set pace and avoid delays. For example, if one of your financial goals is to eliminate credit card debt, you might strive to pay it off over three years. In addition, you need to define the specific monetary amount for each goal. In the case of credit card debt, it is not simply the existing balance. You must also factor in interest that will accumulate until the debt can be paid off.
3. Write a detailed plan
: Now that you have specific goals and defined parameters, the next step is to make a step-by-step map of how you're going to reach those goals.
For your credit card debt, you can choose one of two
snowball debt reduction methods
. Once you have the plan in place, you'll also need to figure out how you are going to pay down the debt. If you have $5,000 in credit card debt that you want to pay off in three years, you must set aside just over $4.50 a day. Add in the interest payments and you might need $5 a day to reach this goal.