One of the most important things you can do now so you can find yourself in solid financial footing in the future is to start figuring out your financial goals. Money and budget issues are often very difficult to tackle because there seems to always be less than enough. Most of the time, there are more days than money left which add to the feeling of helplessness as far as our budgets are concerned.
Here are some common financial goals and how to go about putting a figure on them:
Purchasing a home.
Most, if not all, Americans yearn to live in a home of their own. Not only is it a good investment, it also allows you to do what you want with it without having to ask permission from your landlord. Try to do some research on what the median price of a home is nowadays. Let’s say you plan to get a $200,000 home. To be able to get that, you need to have 10 percent to 20 percent saved for the downpayment plus anywhere from 1 percent to 5 percent for the closing costs. So the lowest that you need to save for a $200,000 home, is $22,000 and the highest is $50,000. Of course, the more you save, the better it is going to be as you’ll end up paying less on the monthly amortization.
Another smart way of going about a home acquisition is to really strive to pay for it in cold hard cash while living in the cheapest but decent home you can find for the meantime. Yes, this is possible but it is going to take a lot of discipline and effort on your part. Of course, you will have to be patient as accumulating this kind of money is going to take a few years.
Buying a new car.
Everyone dreams of getting their own car. And this is another acquisition that is going to cost you money. If you want to get a brand new set of wheels, you also need to save anywhere from 10 percent to 20 percent for the downpayment. That means if the car costs $30,000, you have to save anywhere from $3,000 to $6,000 to be able to drive it home. But it would even be smarter if you pay for your vehicle in cash as it depreciates in value the moment you drive it out of the dealership.
Saving for emergencies.
You know just how unstable the world has become these days. One day you have a job and the next you are given the pink slip because the company needs to downsize to survive. You need to guard yourself against these and other emergencies which will potentially drain your resources and cause you to go in debt. Experts recommend having financial emergency savings of anywhere from three to six months of your living expenses so that you will still remain afloat when something bad rocks your world.
To arrive at this computation, you need to sit down and figure out your budget so that you know how much you need to set aside for your living expenses (this amount is lower than your monthly income). The more unstable your jobs is or if you are the sole breadwinner in the family or have a sickness that could put you out of commission anytime, the more months you should put into your emergency fund. But if you are in government service for many years now and have no intentions of quitting or have established yourself well in a relatively stable company then a minimum of three month’s emergency savings is enough.
Erasing your debts.
Debt is a burden that many people now wish they never got into. From student loans to credit card debt to personal loans, your financial obligations can weigh you down and prevent you from making the most productive use of your money. Instead of using it to prepare for your retirement or save for your kids’ college education, you lose the opportunity because you have to keep paying your debts each month.
So calculate how much you owe right now and make a determined effort to pay back every cent. There are two ways to pay your debts. The most common method suggested by financial experts is to tackle the high-interest debts first. The rationale behind this is that you avoid accumulating interest and prevent your debt from getting larger. The other one is called the debt snowball, popularized by Dave Ramsey in the Total Money Makeover. He advocates paying the smallest debts first so that you get the feeling of winning small victories and are thus motivated to keep on paying your obligations. Choose the method that you are most comfortable with and will most likely stick with until you are able to erase your debts completely.
Of course, you may have other goals, too, like funding for retirement or saving for your children’s college expenses. Be sure to put a price tag on these so you know how much you are going to be putting away each month to achieve them.
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