Create a Long-Term Financial View
Money is usually an emotional subject, so anytime emotions become involved in decision-making, it’s difficult to maintain a bigger picture. Choices tend to go based on what’s most exciting, opportunistic, or enjoyable at the moment. Unfortunately, these short-term decisions often produce long-term ripple effects that are something less than ideal.
To handle money successfully, you need to learn to put emotions aside and adopt a long-term outlook. For example, rather than thinking primarily about what’s best right now, it’s far better to think about what’s best for your family in 5, 10, or 15 years.
Living for the moment is fun, but the stability of a promising financial future will help you sleep easier at night. Wanting a nice financial future isn’t to say you can’t enjoy the resources you have today, you absolutely can, but you have to be smart about balancing immediate gratification with future financial security.
Steps for Protecting Your Family’s Financial Future
Every family’s situation will be different, however, the sooner you start planning for the future, the better you’ll build up your finances. Listed below are several steps you can take.
1. Set clear goals.
You can’t possibly imagine a long-term vision for anything if you don’t have specific goals or don’t know where you want to be in the future. Think about what you hope to accomplish and before you do anything else, it’s time to set some goals.
The best way to do this is to grab a sheet of paper, phone, or whatever you’d like to use, and start writing down everything that comes to mind. If you’re married or have a significant other you plan to be with long-term, they should be involved in the exercise. Here are some starter questions to discuss and respond to in writing.
Where do you see your family in 3, 5, 10, and 15 years?
What do you want your daily lifestyle to look like?
What assets do you hope to have?
When do you want to retire?
What do you want your career to look like in 3, 5, 10, and 15 years?
What goals do you have for your children?
The more detailed you are with your goals, the better. The point of this is to help you figure out what sort of monthly cash flow you’ll need to create the lifestyle you want. For example, if you only need $5,000 per month, the steps required to reach and sustain this income level will be much different from someone who needs $50,000 per month.
2. Get organized.
Once you’ve spent some time dreaming and goal setting, it’s time to get to work. Of course, this starts with getting organized. Here are a few recommendations:
Make a list of every financial account you have. These accounts should include checking accounts, savings accounts, credit cards, brokerage accounts, retirement accounts, and so forth. Record all balances in a spreadsheet and store all login/password information in a secure password wallet.
Make a list of all your debts from smallest to largest. Then, make another list of all your debts from highest to lowest interest rate.
Create a paper filing system and digital filing system. Use these for all financial statements, documents, and records you receive. Then, begin filing all new documents away in an orderly fashion.
Go through your bank and credit card statements. You’ll want to review all income and expenses. Use this information to create an itemized monthly budget and optimize for maximum savings.
You’ll probably be amazed by how much relief you feel just by getting organized. Even if your finances aren’t in great shape, the simple act of consolidating information and putting it all in one place will give you peace of mind.
3. Pay down bad debt.
Few things have the potential to hold your future finances back as powerfully as bad debt. Whether it’s credit cards, car loans, medical bills, or excessive student loans, bad debt chokes your budget and eats away at your cash flow. So paying bad debt down as soon as possible should become your top priority.
Many people start playing defense with their debt. They make the minimum payments and just sort of push the “ball” down the road until next month.
Going on the offensive means taking every spare penny above and beyond your essential expenses which are housing, food, medical, transportation, etc., and using it to pay down debt.
Your objective is to eliminate bad debt as soon as possible so you can start investing in your family’s financial future.
4. Get a trusted advisor.
With all of the do-it-yourself online platforms and apps available these days, it’s tempting to manage all of your finances on your own. However, there’s still value in partnering with a trusted team of advisors to help plan out your investment strategy. Your team will include a financial advisor, insurance advisor, and certified public accountant (CPA). While you can probably find one person who wears all of these hats, it’s wiser to separate yourself from one single person and create your own makeshift team of financial experts who specialize in one niche.
5. Teach your children about money.
The final suggestion is to invest consistently in the financial education of your children. They’ll be the ones who (hopefully) inherit some of your wealth in the future. You want to make sure your children or others you may help financially are well equipped to manage these funds.
Financial literacy is at an all-time low in the United States right now. You simply can’t depend on the school system to teach your children about money. It’s up to you to impart lessons around saving, investing, and spending.
Adding It All Up
Of course, there’s no perfect formula for building and keeping wealth. If it were a matter of filling in an equation and aligning the right puzzle pieces in the proper places, everyone would be wealthy and financially secure. Every individual’s situation is unique, and any number of circumstances change from one family to the next.
While there’s no way to secure your financial future with 100 percent certainty, implementing the strategies outlined above will put you head and shoulders above your peers. And keep in mind that the more urgency you bring to the task, the better your chances are of orchestrating a bright future for your family.