You might have come across a whole lot of financial articles that discusses ways to achieve success in managing your money well. However, this particular article will tell you some practical ways to accomplish your set goals, find out the most apt inspiration and advice that’ll propel you to ultimate success that you’ve planned all this while.Ways to manage your finances
Here are some of the practical ways to build up a sturdy savings fund for your retirement:
• Start saving now – One of the most elementary things that you’ll have to understand here is that the amount of money you are saving isn’t of much importance as compared to amount of you save at the end of each month. You may contribute $5-$10 towards your savings fund, but the habit to save money is crucial to your financial stability during your golden days.
However, continuing to save that paltry amount won’t help you to build up a dependable amount of retirement fund or even an emergency fund. In this case, it is a must for you to look for ways to boost your monthly income so as to drive up your savings.
• Get rid of debts faster – This is because with excessive amount of debt liabilities you are very likely to waste a lot of money on interest payments. As a result, it’ll increase your monthly expenses and decrease the amount of disposable cash at your hand. Moreover, there is little that you can do to meet your monthly household needs after paying off your debts and that may force you to borrow excessively.
So, one of the best ways to get rid of your financial obligations is to repay the highest interest rate debt first, besides making the minimal payments on all the other credit accounts. Another smart way to pay off your debts faster is to make extra monthly payments whenever possible.
• Don’t let anything fail you – Whatever your performance or position might be with respect to your financial goals, it is best not to despair now. Actually, at this point of time, you should be pursuing your goals all the more vehemently and this approach of yours will propel you closer to your retirement success.
So, the imperative at this time will be to identify a major retirement goal of yours and give your full effort, commitment and love towards it to accomplish that by the end of this year. Though it can be difficult for you to achieve that, yet you’ll do so definitely and all your effort would’ve been worth it.
Though you may be having an impeccable retirement plan, yet it is important for you to measure the amount of success you’ve achieved or rather how your portfolio performed so far.Ways to measure your progress
Here are the key steps that’ll help you to understand your performance vis-a vis your retirement goals:
• Measure the performance of your investments – You’ll have to evaluate the performance of the stocks, bonds or mutual funds that you’ve invested in with respect to their individual peer group and indexes. Use financial tools like ‘Schwab Mutual Fund OneSource Select List’ to find mutual fund alternatives, in case you see that your fund is performing poorly as compared to other funds in that same category as well as index.
• Follow a benchmark for your portfolio – Evaluate the performance of your portfolio as a whole. This should include all the tax-deferred as well as taxable accounts. After that, weigh your portfolio’s actual performance in the previous year to get a benchmark return of appropriate market indexes so as to match your own asset allocation objectives.
It is very likely that some parts of your portfolio might have performed better than the others and that is fine. However, you should have that well diversified across different asset classes since returns aren’t always as uniform as it may appear. Apart from that, you need to rebalance your asset allocation on regular basis that is compatible with your retirement objectives.
• Create a savings/investment plan – An investment plan is indispensable when you are trying to measure the progress towards your retirement goals. So, putting a plan in place involves evaluating your present financial situation, locating your goals (student loans for your children, retirement fund, etc), then creating an investment and savings plan to accomplish them. All these should be supplemented by a good distribution plan in order to progress towards a financially stable retirement with ease.
A good plan, properly executed and tracked all along the way, may increase your chances of accomplishing your objectives by finding the right balance between working diligently toward your long-term retirement goals and that includes a secured retirement as well as enjoying your life now.
• Evaluate your own net worth – Total up all the assets you have to find out your current personal net worth. That may include things like taxable/tax-advantage investment accounts, your home’s equity, other real estates owned, equity in your company, employer stock units and other investment alternatives. Moreover, you’ll have to calculate all your liabilities like mortgage, credit card balances, real-estate commissions, capital gains taxes, taxes on tax-deferred retirement accounts and other secured loans.
Follow that with a projection of your personal cash flow. This can be done by creating a statement of your total yearly income excluding the expenses. Through all these efforts you’ll get to know whether or not you are on track with your savings goals. The fact is your savings is critical in helping you to accomplish your retirement objectives and to increase your own net worth in due course of time. As a result, a smart budget with savings included in it as a non-discretionary line item will provide you with a statement with a good amount of cash flow.
(Last Updated: April 22nd, 2017)