Asset Protection Lawyer
The first step in financial planning is determining your short-term (under a year), mid-range- (three to five year) and long-term (over five years) financial goals. The next step is setting a strategy that will achieve these goals.
Many planners use a SMART strategy to do this. Using this strategy means working together to set goals that are specific, measurable, achievable, relevant and timely — SMART.
SMART planning recognizes that the future is unpredictable and things can change. You may lose your job. You may face a recession or a natural disaster. This type of planning instills good habits you can revisit when the bad times pass.
Following are four steps toward achieving your SMART goals:
- Set a Budget and Stick to It
Setting a budget gives you a true measure of your income and expenses. Fixed expenses, like rent or a mortgage, must be paid. Discretionary spending, like buying new clothing or eating out, are flexible. You can make these purchases or you can save that money toward a future goal. SMART budgets always include a line for savings.
- Save, Save, Save
Circumstances can change quickly. If nothing else, the Covid-19 pandemic has taught us that. Having an emergency fund with at least three months of liquidity should be a major goal. That may sound overwhelming, but even small savings add up over time. Saving for retirement is another important goal. With good financial advice, investing even small amounts can yield large amounts over time.
- Be Aware of When and How You Use Your Credit Card
Paying off credit card debt goes hand in hand with your credit score. In general, the three top credit-scoring agencies regard under 10% of credit card debt as the gold standard. Sometimes it is impossible to maintain that, especially when there are unexpected expenses like a college, a hospital bill or a new furnace. Things happen. Expenses like these are not discretionary, and your goal should be paying these debts as quickly as possible. Being aware of how you use your credit card is another aspect of achieving your SMART goals.
- Evaluate Student Loans
Student loan debt can be part of your budget from the time you graduate until well into your mid-career years. You have options. It may be possible to refinance the loans at a lower rate or even have them forgiven.
Whatever choice is right for you, trying to pay off debt quickly should be one of your SMART goals. Instant gratification was a hallmark of our times, at least until the Covid-19 pandemic started. Things changed when the supermarket shelves were empty of toilet paper and we had to wait until a new delivery arrived. It was an uncomfortable experience, and it taught us that waiting is sometimes the only option.
For more guidance about how SMART goals can teach you to distinguish between what is needed now and what is worth waiting for, consult an asset protection lawyer in Schaumburg, IL, like the office of Bott & Associates, Ltd.