Financial planning tips for new investors

The day you decide to take control of your financial future is the day you take an active step toward your financial freedom. Day-to-day life is hard for many people in their 20’s and 30’s with student loans, credit card debt and car loans. The financial future for many of these individuals is bleak. Anyone can advise that you need to save more and spend less, but it is how you achieve it that makes it the difference. It helps if you start planning your financial future when you’re young, even if you’re living paycheck-to-paycheck.

“Research has shown that those who plan for the future end up with more wealth than those who do not. Successful people are goal oriented. According to “Investopedia’s” 10 Simple Steps To Financial Security Before 30, “…they set goals and develop a plan to achieve them.” The process of planning and achieving your financial goals depends on how serious you are. What is it that you want to do financially?

Whether it’s paying off loans, saving for vacation or whatever it may be, make realistic goals. Differentiate your goals in to the short term and long term. This way, each time you reach certain goals, you can feel a sense of accomplishment. Have an emergency saving goal for 6 months to 1 year, just in case of an unforeseen and/or unexpected situation such as job loss.

The first step is to take is understanding your finances. What are your spending habits, liability and disposable income? Write down all your expenses for a month, such as eating out, car insurance, gas, utility bills, rent, food, clothes etc. Accurately list all expenses, even something as small as a dollar on a vending machine snack expense, so you can evaluate your spending as accurately as possible. The key is to identify your spending habits properly. Make a spreadsheet or word documentp; whatever method that works for you for an entire month. It is very important to be exact and account for all spending each day at night or the first thing in the morning. Record all liabilities such as insurance, rent, utilities bills, etc. Account for all your disposable income, such as trips, movies and shopping. If you need to improve on your income, then try getting a promotion or moving to better paying job that you like. Remember, you should enjoy your work or else it can become a nightmare.

After a month, evaluate your expenses by needs and wants. It is important to recognize and organize your spending habits. List your needs, such as insurance, grocery, gas, student loan and credit card debt. Then list your wants, such as a pair of new shoes, new gadgets or going out to a restaurant.

Now that you have organized your finances by needs and wants, figure out where you can cut down on expenses. One such example is comparing car insurance costs and getting the best price for your policy by shopping around. Take lunch from home and plan to make meals at home instead of frequent restaurant trips.

When it comes to debt, pay off loans that have the highest interest rates first. Check and compare the rates on your car loans, student loans and credit cards. Keep a close watch on your credit card and try not to carry a balance. If you have to carry a balance on the credit card, then move your balance to a lower interest rate card to lower your monthly finance charges. Some credit card companies offer up to 1 percent cash back for all your purchases, and sometimes companies have special 2 percent or 3 percent cash back on groceries or gas. Take advantages of these offers as every cent counts.

For investments, check with your local bank if they have free financial consulting or free financial seminars. Look online for financial guidance as well. A favorite of many is Suze Orman. Reading some investment books is a way to help yourself. Be sure to consider several different options and then make a decision that you feel that is best for your needs. Open a Roth IRA or 401(k) plan from your employer for your future retirement savings.

When considering financial investments, remember, it is your money. The more information you have about your finances, the better the plan you can put together to invest in your financial future. As the saying goes, “The early bird gets the worm.” Your finances are no different, as the earlier you start planning, the better. The end goal is to be able to lead a happy, low stress life, which is certainly viable with a little planning and self-control.