Do you have a financial plan? If not, it's time to get one. And if your current plan isn’t providing the desired results, then it's probably time for a new one. Some people underestimate the importance of having a financial plan. But without a plan, it might be harder to reach long-term goals, such as saving up for a house, paying off debt or planning for retirement. Therefore, it's important to periodically reevaluate any plan, and make necessary adjustments. Here are signs that it’s time for a new plan.
1. New Stage in Life
As you become older and take on new responsibilities, you'll need to revamp your financial plan. For example, the financial plan you have in place when you're in your 20s and single, might not work when you're 30 with a family. Whether you're graduating from college, getting married, having children or retiring, adjust your plan as necessary to ensure you stay on the right path.
2. Your Portfolio Consists of a Savings Account
It's good to have a savings account, but this isn't the only way to grow your money. Speak with a financial planner and discuss other ways. For example, you might open a money market account, a certificate of deposit or an online high-yield savings account. Also, you might discuss other investment options such as stocks and bonds.
3. You Have Nothing in Savings
Financial experts recommend a 3 to 6-month emergency cash cushion. If you have nothing in savings, it's time to readjust your financial plan. For example, look for ways to reduce expenses, and resolve to deposit 10% of your paycheck into your savings account. You might have to start slow with 2% and slowly increase to 3% or 5%.
4. You Have More Credit Card Debt than Monthly Income
We all fall upon tough times, and if you rely on a credit card to fill gaps in your income, it's time to devise a debt elimination strategy. Debt isn’t going away by itself. To eliminate balances, you need to pay more than your minimums, negotiate a better interest rate, or put any free money toward paying down balances. Some people look into part-time work to generate extra income.
5. You’re Tired of Being Broke
You might work hard, yet never have extra money. If you're simply tired of being broke, it's time to get a new plan. First, you'll need to determine why you never have money. Maybe you don't earn a lot, or maybe you have too many expenses. Whatever the underlying problem, rework your budget to see if you can eliminate expenses and free up cash. Also, look into better paying opportunities, or take courses to help snag a higher salary.
6. You Haven't Grown Financially
If your financial condition has not improved over the past 5 to 10 years, chances are that you're doing something wrong. Pinpointing the exact cause can be difficult, and you might need help from a financial planner to get on track. A professional planner can assist in all areas related to personal finance, such as saving money, paying off debt or buying life insurance.
7. You Never Had a Plan
If you didn't have a plan to begin with, it's time to develop one. First, you'll need to set any long-term or short-term financial goals. Next, you need to create a step-by-step strategy for reaching these goals. For example, if you want to save $1,000 in the next 12 months, you'll need to determine how much to set aside each month, and you might resolve to avoid any new purchases.
Whether you're looking to start or improve your financial plan, a roadmap for your personal finances is the ticket to getting what you need financially. What are other reasons to get a new financial plan?