Building Your Financial Roadmap

Many of the actions you take today can have a profound impact on your future. That holds especially true for your financial decisions. Here are some thoughtful moves to consider as you build a financial roadmap to help guide you towards the future you want.

Set Short- and Long-term Goals

Picture what your life will look like in five years: How far will you have come in your career? Will you be starting, or growing, a family? Will you be buying a house? Then think about the next five…and the next five after that. Goals as simple as saving for a car, or even a vacation, can provide a framework for how you save and give you something concrete to work toward.

Master the Art of Budgeting

Start by figuring out how much you’re working with, including both assets and income. From there, consider your fixed expenses (e.g., rent, groceries and utilities) as well as what you’ll be spending to pay down any debt (e.g., student loans and credit card debt). Finally, think about your variable expenses, or the things you don’t necessarily need but that add to your quality of life, like entertainment and vacations. Once you have a handle on these items, you can set reasonable expectations for your spending and saving habits.

Luckily, there are many great budgeting tools available today that can help you track your spending habits by syncing with your financial accounts. Many of these tools will also allow you to set budget goals for each spending category and receive alerts whenever you are at risk of exceeding your budget.

Be Prepared for the Unexpected

Even the best laid financial plans can be thrown off course by unexpected circumstances or emergencies. For this reason, it’s smart to have a financial cushion in place. Conventional wisdom is to have enough savings to cover three to six months of essential expenses.

Keep in mind, you don’t have to the full amount saved to start your fund. Start small and contribute over time until you’ve reached your target amount. To make the task even easier, consider setting up an automatic transfer into the account each month. A few tips: Keep this money in a liquid account like a high-interest savings account so it’s accessible when you need it, and keep it separate from your day-to-day accounts so you’re not tempted to dip into it unless you really need to.

Other ways to prepare for the unexpected are to cover yourself and your family with insurance, including medical, life and disability, as appropriate, and to embark on the process of estate planning. You’ll want to ensure your wishes are documented and your assets will go to the intended beneficiaries if something should happen to you.

Keep an Eye Toward Retirement

Even if you’re just getting your feet wet in the working world, it’s never too early to start planning for your golden years.  A great place to start saving is in your workplace retirement plan, like a 401(k) or 403(b). Many employers will match your contribution up to a certain amount, and contributing enough to take full advantage of that match is one of the wisest money moves you can make. Outside of work, you might explore a traditional or Roth IRA, which each offer various tax advantages as you build your nest egg. (Keep in mind, IRAs have eligibility rules based on your income and ability to contribute to a retirement plan at work.)

Start Investing in the Markets

The concept of investing may sound intimidating, but it can be a great avenue for those looking to potentially build wealth to achieve their goals. And guess what? If you contribute to a retirement account like a 401(k), 403(b) or IRA, you’re already an investor!

Outside of those accounts, you can invest to help meet other financial objectives. By putting your money to work in the markets, you can potentially achieve higher returns than the interest rate earned in a savings account.  And thanks to online and automated platforms, it’s easy to get started—even if you only have a small sum to invest.

Maintain Good Credit

Having strong credit can go a long way towards simplifying your financial life. You may get a better rate on car loans and mortgages, and if owning a business is in your future, it can help you start off on the right foot. Several factors impact your credit score, including payment history, length of credit history and credit utilization.

You can find out your score by requesting a credit report from one of the three national credit bureaus online: Experian, Equifax or TransUnion. You are entitled to one free copy a year, or within 60 days of being rejected for credit, employment, insurance or rental housing due to your credit. Many banks and credit card companies now offer credit score trackers as well.

Pay Down High-interest Debt

Debt is expensive and has a way of sticking around for far longer than you expected. When paying it off, consider prioritizing high-interest debt, which is typically comprised of credit card or store card debt. It’s important to continue chipping away at lower-interest debt like student loans as well, but it may make sense to keep your cash free for other purposes rather than paying that debt down quickly.

As you start to build wealth, it may be helpful to consult with a Financial Advisor or other financial professional who can help you build a formal plan and implement an investment strategy to support it. Armed with the right roadmap, you can set yourself up for success, whatever that means to you. The sooner you start, the better—and your future self will surely thank you.