If you were given the choice between having a secure future where you can accomplish goals and achieve dreams OR being financially insecure, it’s unlikely you would make the latter choice. To help turn the first choice into your reality, it’s important to have a solid financial plan in place.
To do this, it may be beneficial to go through a process of discerning and prioritizing your goals. You might try to determine where you are right now financially, and then set, implement, and track goals—tweaking as needed, which can include reaching out for expert help.
Saving and investing play key roles when financially planning for the future, and how you’ll invest will likely depend upon many factors, such as generation.
For some generations, it may be about planning for retirement, while others may want to focus on putting away cash for an uncertain future.
For younger generations, the focus is often on things like paying off student loans while also saving for a down payment on a house.
Because current financial positions and goals vary for people, this post will offer tips to help you create a plan that’s every bit as unique as you.
Setting Goals: What and Why
How you plan for your future depends, in large part, on your goals. Ones that people often have include:
• paying down debt
• saving for retirement
• buying a home
• starting a family
You’ll likely see some of your own goals in this list, and you may well have other goals that are not included. As you decide what’s most important to you, also consider the “why” of it all.
Paying down debt, for example, may be important to you—because the less interest you pay on outstanding debts, the more money you can save and invest for other items on your list.
Saving for retirement may include, for you, a desire to travel to the country of your heritage, while buying a home may represent true stability—a place where can raise a family, run a home-based business, and the like.
As another example, here are 10 financial milestones that you may set for yourself if you’re in your 30s. They may range from establishing a good credit score to paying off student loans and credit card debt—as well as include ways to budget for and maximize the part of your budget that’s set aside to have some fun.
When you know why you’re moving towards a certain goal, it can provide powerful motivation for you to stay the course, even if something unexpected happens—whether it’s the furnace on the fritz or an unanticipated surgery.
Understanding the Now
Although it may, at first, sound contradictory, one of the initial steps of planning for the future includes taking a deep dive into where you are right now. This includes things like:
• your assets (what you own)
• your debts (what you owe)
• your income (what you bring in)
• your expenses (what you pay out)
At a high level, savings can be determined by adding up what’s in checking and savings accounts, including emergency funds, vacation funds, and so forth. Add what you’ve put away into retirement accounts, a 529 account, and so on.
Debt balances can be calculated by collecting recent statements from credit card companies, student loan services, and so forth. Add the outstanding balances up.
As far as income, how much comes in monthly from wages/salaries, bonuses, interest, and dividends? Rather than using gross income amounts, it might be more helpful to consider your take-home pay along with pre-tax contributions—perhaps for retirement or a flexible spending account.
Then, list your relatively fixed expenses, which could include your rent or mortgage payment, what you pay for monthly utilities, property taxes (if applicable), insurance premiums, prescription costs, groceries, gas, and so forth. Also look at what you spend on clothing, hobbies, entertainment, and dining out. Are there any other expenses you need to consider?
This process can be handled manually, or you can leverage technology to aggregate your accounts and track your spending. Personal financial management tools can streamline your overall planning process by automatically updating information as you make progress.
These tools can also provide insights into your spending patterns as well as help you identify recurring charges you may have forgotten about Choosing to track your progress manually or with help is a matter of preference. If you would like technology to help with the heavy lifting, consider trying SoFi Relay.
It can be hard to balance living in the now while also saving for the future, but there are ways to plan so you can have your cake and eat it too—saving for the future while also living life to the fullest.
Creating a Financial Plan
At its simplest, when thinking about how to plan for the future, it might be helpful to connect the dots between where you are today and where you want to be to achieve the goals you’ve set. In other words, your mileage may vary, depending upon the distance you need to travel.
As just one example, let’s say you have a goal to pay down debt. If you examine your finances more closely, then perhaps you decide that it’s really a two-pronged issue. You need to:
• accelerate how quickly you’re paying back your student loan debt
• pay off your credit card debt to reach the point where you can pay off your outstanding balances monthly
It might be helpful to set a target date to accomplish each of these debt-reduction goals and then reverse engineer how much more you would need to pay each month to make that happen.
You could also explore, for example, how much more quickly you could pay off credit card debt if you consolidated them into a personal loan with a lower interest rate and/or whether refinancing your student loans is a good choice for you.
In this example, we’re looking at one goal. What can you do, though, if you have multiple goals to accomplish? If that’s the case (and that’s not uncommon), then prioritizing your goals may make the most sense. After all, if you spread yourself too thin, you may not see progress quickly enough and this could result in a loss of motivation.
Here’s one more thing to consider as you create your plan. It may be tempting to focus on just debt reduction (and, in some cases, that could be the right strategy), but it can also help to cultivate a pay-yourself-first attitude.
With this philosophy, the top priority is to put a predetermined amount of money into personal savings and investment accounts. When this is your main focus, it can help to ensure your discretionary spending doesn’t cut into your financial growth.
Implementing Your Plan
Once you’ve formulated a plan of attack, it’s time to put it into action! If, using our previous example, you want to pay off student loan debt, now might be the time to increase your payments by appropriate amounts to pay them off by your target date. A next possible step? Automate those payments to reduce the amount of time spent on managing this part of the plan.
If your goal is to save more money, the same concept can apply. Determine how much money should come out of your paycheck monthly and then you could automate that part of the plan.
If you’re ready to start a retirement account, you might consider a Traditional IRA or Roth IRA. For non-retirement accounts, you might consider a taxable account as step one—these can include bank accounts, money market accounts, and individual and joint investment accounts.
Monitoring Your Progress
As you automate payments, you’re using a set-it-and-forget-it strategy, freeing yourself up to work on other parts of your plan. And, that will likely include at least an annual review to see how it all is progressing.
Some people like to do that as part of ushering in the new year. Others may prefer spring, right around tax time, while still others might like to review their plan in the fall when they’re making employee benefits decisions. As with most parts of your unique plan for your future, there are many ways to do it right. It all depends on the individual.
If you discover that you need help with your plan or have questions, it can make sense to speak to a financial planner.
Investments: Planning for the Future
No two investors are alike. Having said that, there are patterns of investing and, if you know which kind of investor you are, it can help you to put your investments to work in a way that dovetails with your personality. In general, there are three investor types:
• active investor
• passive investor/low-maintenance investor
• hands-off investor/automatic investor
You might look at this list and feel as though you know where you fit in. Or, you can take a quick investor quiz to gain insights. Once you know what kind of investor you are, you can determine what kind of investing works best for you.
First, let’s look at active investing.
If you want to be involved in each aspect of investing, embracing a hands-on approach, SoFi supports self-directed investors through free trading with active investing. This is a hands-on way to put your money to work, as you buy and sell stocks with zero SoFi fees and no account minimums.
A long-held myth says that you need to be an expert to trade stocks. This active investing program debunks that myth, allowing people who enjoy being involved in their investments to learn by doing. There are news updates and more in the SoFi app, and you can connect with other members at exclusive events—which demonstrates that, yes, you can do it yourself without doing it alone.
And, as soon as you start investing with SoFi, you get access to rate discounts on other products and become part of a community that is on a mission to get their money right. Plus, you get complimentary access to financial planners.
Passive Investor/Low-Maintenance Investor
If you like the idea of investing but don’t want to be significantly involved in making investment decisions, then you may fall into this category. This could mean that you have a “buy-and-hold” philosophy where you buy securities and plan to hold on to them for a longer period of time, throughout fluctuations of the market.
Or, it could mean that you’re open to more activity on your investment account, but you don’t want to spend much personal time studying the market and otherwise handling the details. If this sounds like you, then you may want to consider automated investing. Read on for more details!
If setting it and forgetting it sounds good to you, then you might want to explore automated investing with SoFi. With this choice, you don’t have to follow the market to master it. SoFi professionals will help build and manage your portfolio without charging a management fee.
If you want to invest but don’t want to take on the stress of setting goals, diversifying your money, and rebalancing your portfolio, SoFi can help you with all of that. Financial planners can help create a plan for your future that can tackle multiple goals, adjusting your investments regularly, so your money is always invested where you want it to be.
They can also help diversify your portfolio, allocating across different financial investment types to help to manage risk. And, your access to financial planners is always complimentary.
Leveraging SoFi Invest®
Think about the goals you have for your future and the role that investments can play in helping you achieve those goals.. No one plan will work for every investor—everybody’s financial situation is different. But no matter what goals you’ve set, SoFi members get one-on-one access to financial planners to help you create a plan that’s uniquely yours.
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