Everyone dreams to be financially independent. But as the saying goes, a dream without a plan is just a wish. If the dream must become reality, we need to act on it. But how do I begin is the basic question that most beginners struggle with.
Financial goals will vary based on where you are and what you want to be. First, start with assessing where you are in your wealth management journey. One of the most important aspect of any financial goal is ability to save your earnings. Depending on your age, career span, lifestyle, and other factors you may fall under one of the 3 categories of savers: Beginner, Practitioner, and Long-time saver
Beginner: At this stage, typically net assets are zero or in the negative. You rely on your monthly income to pay for bills. There is not enough to save.
- Your goal is to increase your income and/or decrease your expense.
- You need to look for additional side gigs and other ways to increase your income flow. At the same time, you need to look at ways to cut spending. It could be consolidating your debt and negotiating a lower rate, eating out less, reducing your coffee runs to the neighborhood barista, moving to a less expensive place to live etc.
- Set yourself a goal to save 5% of your income. Come up with your milestones to increase saving and reduce spending based on what is possible for your situation.
Practitioner: At this stage, your net assets are trending positive. Your monthly income pays your expenses and there is money allocated to build your savings.
- Your goal is to increase your savings.
- You will also look at your current income source and see if there are ways to increase it. Could you get a pay raise, are there other side hustle options available? Like a beginner, you also need to check your expenses and see if there is room to cut any. Are there expenses that are not needed? Can I get rid of them without impacting physical and emotional wellbeing? This will help determine your milestones to be tracked in your financial independence journey.
- Your goal should be to consistently save 10% or more of your income and look for ways to make the savings work for you. Your milestones should track your savings goal and ways to compound your savings.
- One expense that you should not skip on is education or learning new skills that will help with your career progression in the long term. This is a critical investment for the future and prioritize this over other expenses where possible.
Long time Saver: Congratulations on reaching this stage. Your net assets are solidly positive at this stage. Your monthly income covers your expenses and you have a safety net. You have investments to meet your long-term goal.
- Your goal should be to consistently save 15% or more of your income and look for ways to become financially independent. Your milestones should track ways to take you to that next stage of financial independence.
- No matter where you fall in the spectrum of your wealth management, you can start saving today and set yourself to long term success.
- Set up your financial goal and mark your milestones. Reach out to others when you hit challenges and seek help. The visualization of your goal will act as added incentive to save more and make your dreams come true.
If you have not started on this journey, now is the time to begin your journey. If you are already on this journey, keep it up. We wish everyone success in achieving their financial goals.