How to Build Solid Financial Futures

by Robert Morello, Demand Media Google
    A solid financial future can provide the freedom to explore.

    A solid financial future can provide the freedom to explore.

    Your financial future can go a long way toward determining how the rest of your life will play out. Setting the groundwork for a solid financial future provides the money you will need to live in the style you prefer and can help lead to a more comfortable and maybe even earlier retirement. Knowing where to put your money, how much and when can make all the difference in the overall outcome.

    Step 1

    Create a series of financial goals that you will work toward and achieve. Break your long-term goals into shorter two- to three-year increments that make progress more obvious and allow for adjustment and changes in tactics if necessary. Any task when broken into its parts becomes more manageable and less daunting. Creating a solid financial future is no different. Save as much as you need to meet your goals and employ financial discipline to reach each milestone.

    Step 2

    Live within your means or even below if possible. Eliminating frivolous spending, unnecessary or redundant expenses and treating yourself to fewer perks than you may normally indulge in can help to change your financial status from just making it to building for the future. Create a budget that clearly outlines your monthly expenses and takes into account any extras that may be required. Follow your budget with dedication to ensure you do not overstep your bounds. With a firm grip on what you spend and what you save each month, your financial future is already looking better.

    Step 3

    Use the wealth of information available to you through online blogs. People who post have often lived through the situation they are speaking about. They know what works and what doesn't first hand. Read current commentary and opinion and use it as a guide to help you make investment and other financial decisions. Take nothing as gospel but add it to your pile of research information and weight it against all else.

    Step 4

    Eliminate any chance of late or missed payments and the credit difficulties and fees they entail. Use automated bill pay systems offered by most creditors and utilities to keep on top of your finances and to ensure that every account is up to date. Not only can the timely payment of bills improve your financial status, it can also free up more time each month for you to use as you please.

    Step 5

    Pay down and eliminate any debts you may be carrying. Interest fees can be a significant drain on your finances over time, and it is always better to pay off a debt than to carry it along. Even though it may be painful and difficult to accumulate the funds necessary to pay off your standing debts, over time the sacrifice of a single lump sum will prevent the slow death that long term interest brings. In the end the amount you pay up front will be dramatically less than the accumulated smaller payments you made over time. The extra benefit is a positive payoff mark on your credit report and a more positive debt to income ratio.

    Step 6

    Make long-term investments and stay committed to them. Use a small portion of your income to invest in mutual funds, stocks and bonds and check performance indexes regularly. Bonds are low risk, stocks are high risk and mutual funds are somewhere in the middle. Split up your investment so that the risk aligns with your comfort zone and revisit the distribution ratios at least once per year. Use an adviser to help erase any confusion or questions you may have about the process or the state of your investments over time.

    Tip

    • Discuss your parents' financial situation with them as they grow older to avoid unpleasant surprises or unpaid debts in the future. Knowing what to expect either positive or negative can help to prepare you and clear the way for a solid financial future for both parties.

    Warning

    • Any investment comes with the potential for loss. Never invest money that you cannot afford to lose.

    About the Author

    Robert Morello has an extensive travel, marketing and business background. He graduated with a Bachelor of Arts from Columbia University in 2002 and has worked in travel as a guide, corporate senior marketing and product manager and travel consultant/expert. Morello is a professional writer and adjunct professor of travel and tourism.

    Photo Credits

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