Like almost everything else in life, looking at one’s finances isn’t the same for every person; sometimes it’s not the same throughout one person’s life.
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There’s more differences than just thinking about either worrying about debt or monetary growth. There are times when you need something immediately, need to think about different long term situations, need to balance between eating and living and tragedy. Life isn’t simple so why should finances be?
With that in mind, here are 5 ways to think about your financial considerations and what your present strategy should be based on criteria. These strategies will always work, even if you have to do them at different times of your life. At least once every 2 years, if not more often, you should look at them to see where you stand at that moment in time.
1. Your age.
Age should be a major determinant in how you look at your finances. If you’re younger, starting some kind of savings and investing plan while you’re still young means you’ll be able to let your money work longer for you, even if you put away less than what’s often recommended. Having a growth plan where you not only consistently put money, but can increase the amount as you start making more money, not only gives you long term benefits but a stash to borrow against in a major emergency.
Unfortunately many people don’t start thinking about these things until they’re at least in their mid 40’s, where they end up scrambling or taking risks with their money that could fall back on them. Even if nothing bad happens, they might not have enough money to keep them at the comfort level they were used to when they retire. It’s always better to plan for the long term than rush to get there too late in the game.
2. Your income.
Income means the difference between being able to put away more or less money, what you can or shouldn’t spend your money on, and how you’ll either live or should live. With most people the more they make the more they spend, which explains why even rich people end up having financial problems.
It’s okay to have nice things, but they don’t always have to be expensive. Some of the richest people live modestly; look at Warren Buffett, one of the richest men in the world, who lives in a relatively small house in a middle income class neighborhood. Buying less expensive clothes at a department store can look as nice as buying them at an exclusive boutique. It’s not how much you spend as much as how you spend. As always, pay yourself first, which is the first step towards investing or saving your money.
3. Your health.
When looking at health, you also need to look at your family history. If there’s a history of things like diabetes, high blood pressure or cancer, you need to think of ways to address it early on, even if it’s impossible to avoid.
Having good health insurance is always a great option, but thinking early about things like long term care or injury plans, or even putting extra money away for medications that, unfortunately, are probably coming to help you cover co-pays and the like is a smart investment in your future. We never think of these things until we start feeling bad or something happens to a family member; that’s a shame.
Here’s the thing about health insurance everyone needs to know. If you’re lucky, the most money you might possibly spend, not counting your premium, is a co-pay for a physical. However, being injured happens to everyone; sometimes it’s critical. People get diseases; medication can be expensive. Insurance will help you pay less than you otherwise might, and it’s another layer of protection that will give you and your family peace of mind.
4. Your family.
If you have kids or are thinking about it, you should start putting money away to build up and grow as they grow. College is getting more expensive every year and even if they don’t go to college, having money to give them when they reach adulthood can give them a big boost if you have it. It will also save you from having to dip into your own finances to help them out.
You might have to spend more of your money at the present time if your income isn’t enough to put much away for future use, which means you might have to think of ways to either bring in more money or do some creative saving. Kids always need new clothes; they might even need braces. Food costs are higher for families, no matter what you’re eating.
Budgeting will help. Finding ways to make more money will help. Planning in any sense will definitely help. Don’t avoid any of these things; protect your family.
5. What’s going on now.
At different times in your life you’ll have to think about your present living situation: your clothes, car, insurance, entertainment and lifestyle. Some people like to live for the here and now; some like to live for the future. No matter which way you decide to go there should be at least some consideration for the other, some kind of balance so that either way you’re not putting your trust in only one thing.That’s why we recommend looking at your financial life at least once every two years.
You might be the lucky one who has everything turn out as you believe it should, but reality favors those who plan. You might not be lucky enough to win the lottery and, unfortunately, there’s no such thing as a secure career, even if you’re self employed. Always be thinking about things like saving, investing, increasing income… planning!
By the way, did I mention that an accountant or financial counselor of some type could help? It’s something to think about. 🙂
