Personal finance goals evolve and change throughout life. A 20-year-old may be hoping to make car payments and save for a vacation. Ten years later, this person may be concerned about buying life insurance, starting college funds and making mortgage payments.
With this natural growth and change in life requirements, it is important that you always think about how you’ll handle your future needs. This will require that you’re not bogged down by debt, and that you’ve skills — and income — that are sufficient to cover these new requirements.
To do so, begin your financial planning early, even if many of these future requirements don’t seem to be relevant to your current lifestyle. To set financial goals that works for you through your life, stick with the following points.
Keep credit to the minimum
Living credit-free is not optimal. If you’re starting a career, you probably don’t get much income and don’t have substantial savings. To facilitate your life, credit can help you get a car or even a small personal loan that get you started. Keep credit to the minimum, however. And when you do take credit, look closely at the terms and conditions.
Loan officers will always argue that whatever you don’t like is “bank policy.” It could be, but that doesn’t mean you’ve to accept. Shop around for better rates and terms, because the loan you take today is your commitment for many years to come. You need to be sure that you can pay off or settle it, if needed.
Your planning should take into consideration the length of your loan. Even small payments that stretch on many years can add up to a major block to your life changes. That is why it is important not only to limit the amount of credit, but also to limit the repayment period.
Leave doors open
Marriage, children, travel or starting your own business can be goals that are well beyond your immediate plans. Some of these may even be unlikely to happen in your view at this time. Despite how you classify them, don’t strap yourself financially in a way that you can’t change your mind later. For example, don’t take a massive personal loan that doesn’t allow you to change jobs, move somewhere or start a family.
Money can turn into a significant burden. Unless you’re totally settled, it may be a good idea to avoid massive financial commitments, even if they make sense on the short run. For example, if taking a mortgage and buying a house would reduce the housing cost you pay monthly, that may seem like a feasible option. But if you’re not planning to stick with your current job and location for many, many years, this move can prove to be very costly, if you decide to sell on a short notice. Worse, you may have to pass on some good opportunities if you’re stuck with the property that does sell quickly.
Think income
Money isn’t everything — especially when it is not needed. As you advance in life and your commitments toward yourself and your family grow, money become more critical as means to achieve the living standard that you expect. While you still should not be pursuing money solely early in your life in anticipation of that change, you still must keep an interest in earning an income that makes you live more comfortably immediately and in later stages.
You can grow your income by putting a little bit of negotiating effort in your job offer, selecting better investment vehicles and saving as much as possible, etc. Making sound financial decisions that set you financially on a solid ground as early as possible is the first step toward long-term financial stability.
