Reducing Your Stress About Money - It's in the Planning
This week’s episode is all about reducing your stress reguarding money. What we are going to be describing is creating your own personal financial plan. This single best way that I know that you can reduce your stress is to come up with a financial plan and your seven steps to that plan. It is very simple. This is not something that you have to hash over and sit there and really traumatize yourself up about this. This is actually quite easy.
Every single one of these steps are going to help you reduce your stress:
The first one is you go about setting financial goals.
“What do you want your life to look like in 10 years and 20 years?,” things like
“Do you want to own a car?
Do you want to have a house, or
Are kids in the picture?
What do you look like?
What does your life look like in the next 10 or 20 years?”
For those of you that are crossing that age of “What do I want to do when I retire?”
These are the sorts of things that financial planning will do.
It was because I started a financial plan that I created the life that I am now living because I was thinking about
“What do I want to do when I retire?”
It shocked me when I learned that if I planned my debt-reduction and savings correctly I would able to retire at the age of 40, so I had to rework my financial plan and I came up with a system (The 60/40 Principle) that can help you with this.
That is step one, just start by setting financial goals.
Step two, track your money, redirect it towards your goals. There is a lot of money that you are spending that is not in alignment with what you want to do for your future self. I suggest you begin with aligning your spending with your future goals. This is a form of self-regulation that will allow you to build your financial future one decision at a time. That is how anything is built, right? One decision, one step at a time.
Third thing is make sure that your employer is matching. Get a financial advisor if you need to come up with a retirement plan of a 401k if you work for someone else, if you are self-employed make sure that the money that you are earning, that you have some of that going toward your future.
The next one is make sure you have money for emergencies, you know, when you have emergencies don not make them disasters by basically, have $500 in a savings account that can help you out. You need a savings account that you are constantly adding money into it even if it is only $10-$20 a week.
Learn how to tackle your high-interest debt, that is step number five.
Step number six, invest. Build your savings. Invest in your retirement plan, your Roth IRA 529 plans if you have children.
Step seven check your insurances Build a moat to protect and grow your own financial well-being. You do this through getting the appropriate insurances on where you are in this phase of life. Basically, you want to increase contributions if you can, you want to pad your emergency fund and you want to make sure you have the appropriate insurances for the next 10 years and the next 30 years, this is an age-dependent decision.
To recap your 7 steps to reducing your stress about money are:
Step one, create a financial plan. Create your own personal plan.
Step two, track your money.
Step three, get your employer to match a retirement income of some kind. If you’re self-employed, set up a SEP or Solo401k, etc.
Step four, make sure that your emergencies do not become disasters by having some cash sitting on the side.
Step five: Tackle your high-interest debt.
Step six: Invest to build your savings
Step seven: Build a moat to protect your own financial well-being through appropriate insurance.
This is Janine Bolon with your three-minute money tip and the seven steps to creating your own personal financial plan, and I want to thank Nerd Wallet for helping build the article that led to this episode. Have a great day.
If you would like to learn how to pay down your debt while saving money please learn how to implement the 60/40 principle. You may learn more about it through these videos: The 60/40 Principle