Have you been watching the Winter Olympics? Athletes train for hours daily, but there is not a one-size-fits-all approach as it varies for each sport. It is common for athletes to invest four to eight years of training in a sport before making an Olympic team. To have strong finances is similar to training for the Olympics. Depending on your stage in life, you may be focused on getting your first car or house or assessing retirement. It is essential to take the time to budget and strengthen your financial muscles. When you budget your income vs. expenses, you can spend within your means and manage lifestyle expectations.
Financial Fitness Baseline
To start the process you will want to assess your financial fitness baseline by calculating your net worth – the difference between what you own and what you owe. To do this, you would start by making a list of your assets (what you own) and your liabilities (what you owe). Then subtract the liabilities from the assets to arrive at your net-worth figure. You can find your projected net worth by each year for ten years using Metro’s Net Worth calculator.
Create Meaningful Goals
We all have goals we want to reach and envision big dreams for our future. Maybe you want to purchase a home or to retire early. Alternatively, perhaps, you want to be debt-free within the next five years. When you choose your goals, consider the reason why you want to make a change. It is easier to stay motivated toward a goal if the outcome is very meaningful to you! Here is a short video on Achieving Financial Goals from Metro’s Save and Succeed.
Make Your Action Plan
When faced with navigating your financial stressors, you might be feeling as though there is nothing you can do to improve your finances. However, small changes can make a big impact over time. Recognize needs vs. wants and spend mindfully. Needs are things you have to have in order to survive: food, shelter, healthcare, transportation, clothing. It can be challenging to label expenses as needs or wants accurately. Any price difference between practical and luxury is money you don’t have to spend. Read more about five steps that you can take today to help you improve your financial situation. View a short Insight Corner Financial Wisdom clip from Olympic Gold Medalist Serena Williams, a professional tennis player, on Metro's Save and Succeed.
Establish an emergency fund, which is only for money set aside for emergency purposes. In today's uncertain environment, most people should aim to save at least six months' worth of living expenses. An emergency savings fund could cover if your income is interrupted or you have unexpected expenses such as a car repair or doctor visit.
Start saving early for retirement as the sooner you start, you can take advantage of compounding earnings. The sooner you start, the less you’ll need to save each month and contribute overall to reach the same goal in the future.
Track Your Progress
Watch your online banking budget resources on a regular basis. Most individuals will spend more money if they have more money to spend. You’ll want to recognize and manage lifestyle inflation so that you don't sabotage your finances to keep up with the Joneses. Despite expensive vacations, fancy cars, and more, the Joneses might be living paycheck to paycheck and not saving for retirement.
Building healthy financial habits, taking time to create a financial plan, and reviewing your budget regularly will help you make better financial choices and keep you (ice) skating smoothly. Read more about how Metro Credit Union can help you in reaching your financial and life aspirations so you can get your gold medal in 2022.