Whether you’re planning to buy a home later this year or planning for a retirement that’s decades away, life will happen in between.
A job loss, unexpected medical bills or even a blown transmission can throw your money plans into chaos. That’s why, no matter your goals, you need to create a financial timeline that’s flexible enough to roll with the punches — and boy, are there plenty of punches to roll with nowadays.
Ever-rising inflation, record-high gas prices, the ongoing pandemic and global turmoil might make you think that now just isn’t the right time to try to cobble together a financial timeline.
In fact, all of that makes it exactly the right time.
“Even amidst increasing uncertainty, the foundational principles of personal finance are the same,” said Grant Sabatier, author of “Financial Freedom” and co-founder of Bank Bonus. “Uncertainty adds an added level of urgency to making sure that you set up and follow a financial timeline.”
Find Out Where You Stand
Before you can build a roadmap for your financial future, you have to take inventory of your finances as they stand today.
“The first step to building an effective financial timeline is getting an accurate picture of your current financial condition,” said Melanie Hanson, editor in chief of EDI Refinance. “Take the time to calculate your income, savings, investments, debts, and expenses. This core information is going to be essential to creating an effective budget, which is a great short-term tool to help you reach the long-term goals in your timeline.”
Set Ambitious but Realistic Goals
Now it’s time to determine what goals, exactly, your timeline is building toward, and what milestones you’ll use to chart your progress along the way.
“Precise timelines, or deadlines, for reaching financial goals will differ by individual and family,” said Sean Fox, president of Freedom Debt Relief and chief revenue officer of its parent company, Freedom Financial Network. “The key is to HAVE goals, and to create a plan for reaching those goals. The trick here is that it’s generally not about setting specific money goals — e.g., save $1 million by the time I’m 40. Rather, it’s about setting goals for what you want to do and have in life, and then figuring out how you’ll achieve those things.”
Remember, goals without strategies and accountability are just dressed-up dreams.
“What gets measured gets managed,” said Mark Chen, founder of Invest Long Term. “For your financial timeline, it’s important to have realistic goals that can be quantified. It’s all well and good to say you want to be a billionaire next year, but how are you going to do it? Everyone gets punched in the face at times. Budgets can be a lot tighter now with $5 gas. You can make your financial timeline flexible and durable by making sure your goals don’t change, but you find new strategies to reach your goals.”
Make Your Budget Your Roadmap
Now that you know what you’re working with, and you have goals that your timeline is working toward, you can only expect to succeed if you’re keeping track of your debits and credits.
“It starts with your budgeting system and making it as realistic as possible,” said Nunzio Ross, a financial expert who went on to become the founder and CEO of Majesty Coffee. “A full view of the money going in and out of your funds is crucial in ensuring a financially stable future. It is the only time when you will be able to identify your short-term and long-term plans and adjust them to your spending, saving, and investment habits along the way.”
Just remember, in 2022, all budgets must be designed to travel on rocky roads.
“In the same vein, establishing the budget to include emergency funds can help you adjust to uncertain and unpredictable economic times that may come in the future,” Ross said. “It’s a healthy practice to ensure financial security and agility when the need calls.”
Grow Your Money
No matter the goal, all financial timelines share one thing in common — a sum of money as the desired outcome. Unless you inherit a windfall, the only way to get there is little by little.
“Start setting aside a little bit of money for no reason whatsoever,” said CPA and MBA Tatiana Tsoir. “Just 50-100 bucks a month can make a drastic difference in your safety net. If possible, consider investing even a small amount of savings and you will enjoy the side effects of the power of compounding. Let your money work for you as hard as you are working for it.”
A Checklist for Your Financial Timeline
Jarod Tibbetts of COUNTRY Financial created the following checklist for creating almost any financial timeline, whether the goal is saving for college, saving for a car, saving for kids or saving for retirement.
- Take advantage of still-low interest rates by consolidating your credit cards and other toxic debt.
- Harvest extra money by cutting expendable bills, like overlapping streaming services, sports packages, lattes and landlines — every little bit adds up!
- Treat savings as an expense and pay yourself before you pay the rest of your bills.
- Invest in your health — poor health is expensive and goals aren’t worth achieving if you’re too sick to enjoy them.
- Take care of your belongings — from maintaining your car to avoiding frozen pipes, routine upkeep saves you money in the long run.
- Revisit your insurance policies to make sure you’re not overpaying for coverage you don’t need or that you can’t get the same coverage for less.
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