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Whether you are a young adult just starting out, a single parent in transition, a couple with mounting financial responsibilities, or a mature adult who just wants to get things under better control, it is always a good time to do some serious personal financial planning.
Here are a few basics to help you focus in critical areas:
1) Analyze Your Expenses. Start by taking stock of your current situation. Look at fixed costs (e.g., housing, utilities, transportation, childcare, loan payments). If these, when added up each month are leaving you with too little to cover groceries and other expenses, then consider which costs might be reduced or eliminated entirely. This may involve some sacrifice but usually feels worth it when some financial stress is relieved.
2) Control Spending and Start Saving. Next, assess where you might cut back on other kinds of spending. Some people have found it helpful to keep a diary of all expenditures - no matter how small - over the course of a month. Usually, this leads to noticing some places where cutting back would be relatively painless, or at least very possible. For instance, cutting back on barista prepared drinks, and ordering “drip” coffee can be a surprising source of “found” money.
Once spending is under control, it is easier to start planning for the future. Establish a fund for emergencies. Consider retirement (even if it seems too far away to be real), and education goals. If your workplace offers a 401(k) plan or another employer-sponsored retirement program, contribute enough to take advantage of any employer match.
3) Secure Insurance Protection. Even when money is tight, it is important not to brush aside the importance of adequate health, life, and disability insurance. How would others who depend on you cope if you were gone or no longer able to work? All families - and individuals - need health insurance today. If you do not receive benefits through your employer, there are policies available that fit the needs of individuals who may only need catastrophic coverage, or who can cover minimal services with the help of an HSA and low-premium/high-deductible terms.
The bottom line is that there are many tools and options available to help any individual or couple improve their financial health and prepare for the future with personal financial planning.
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