Written by When should you start financial planning? Most believe they should wait until they are out of debt or make a certain income; but is it best? Many start financial planning in their 30’s and 40’s. Which is fine, but you may be are leaving opportunities on the table. When it comes to financial planning, you should start as soon as you can. As we get closer to retirement, financial planning feels a little more important. But, one of the biggest benefits to financial planning earlier in life is your time. The more time you give yourself to accumulate wealth, the less you have to contribute each year. For example, someone who has 30 years can invest less than someone who has 10 years. 08
Consistency over time
We call this the miracle of compound interest. Compound interest is a very fancy way of saying your money is working to make you more money. And the harder your money is working for you, the less you have to work for it. That is why investing any amount of money on a consistent basis is so important. Regardless of the amount. Start building the habit of investing a portion of your check each month.
Depending on your disposable income, it is reasonable to put a 10 year plan together. If you have 20 years, even better. For those with 30 years, it is a slam dunk. And before you say 30 years is too long to be financially free, how many people do you know who can retire after working for 30 years? The reality is most people work closer to 50 years and still can’t afford to retire. A financial plan will help you come up with a plan to allocate your money in a more efficient and effective manner.
Is debt holding you back?
For those who want to get rid of their debt before getting a financial plan. You’ll find a financial plan will help you get out of debt too. Whether you have student loan debt or credit card debt, a good financial planner will put a plan together that helps you get out of debt quicker.
Debt is one of the leading reasons Americans cannot build wealth. Did you know 65% of Americans retire broke because they have less than $5,000 saved for retirement? Were you aware 78% of Americans are living paycheck to paycheck? I believe this is because most people don’t have a comprehensive financial plan.
Feeling financial anxiety?
Oftentimes, our bills can feel overwhelming. We just aren’y sure what to do with our money. We have to many bills to pay and it can feel like we have more month than money. As a result, planning for the future feels hopeless. Many beleive they should start financial planning after their debt. However, one of the key benefits of a financial planner is the long-term outlook. They are going to build a plan based on your life goals. When you know what you are working for, it makes it easier to stick to the plan.
You key is being intentional with your money. Even if you’re only able to put $20 or $50 from each check, you’ll be surprised by your success. What ends up happening is you save your first $1,000 and realize it is possible for you to save large amounts of money. That $100 a month turns into $1,000 in less than a year. The feeling of hope is a pretty good and motivating feeling. You’ll want to increase your overall investments and you can. As you get a raise, allocate your raise to your investments. from every check, $50 every month, whatever the amount is, you’ll be surprised because. If you get a tax refund, allocate your refund to your investments.
The first step is a sound financial plan
As long as you have a plan in place, you can achieve your financial goals. It’s a good idea to have a set percentage of your money you’ll invest in your financial dreams. Even if that amount is 1% of your income. Be willing to invest in yourself and your future. You are only stuck if you don’t make a change. By making a change, you can create any life you want for yourself.
Track of your money
You want to have one place to track all of your money. Make it as easy as you can for yourself. I use RightCapital, and it’s a great program. This is a free tool I offer to everyone. While there is a difference in the version my clients see, the main tracking benefits are in the free version. You can see your income, bills, calculate your net worth.
RightCapital enables me to measure your probability of success. We run what is called a Monte Carlo simulation; which is a program that runs a thousand different scenarios. Through those scenarios, it will tell you how many times you make it without running out of money. Ideally, you want a 100% success rate. However, anything above 80% is considered sound. The average person lives to 78, but we plan for you to live to 90 or 100 years of age.
Final thoughts
In short, you should start a financial plan as soon as possible. Don’t wait until you make a certain amount of money. You don’t even need to make sure you are out of debt. If you are making an income, you can benefit from a comprehensive financial plan. A good financial plan should accelerate your ability to achieve your financial and life goals.
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Thank you for addressing the anxiety of planning, even with little money.
My pleasure. We’re all in this together.