4 Essential Aspects Of Your New Year Financial Plan : Under30CEO 4 Essential Aspects Of Your New Year Financial Plan : Under30CEO
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4 Essential Aspects Of Your New Year Financial Plan

| February 5, 2011 | 6 Comments

Financial-Planning-And-Business-PlanAs a new year begins it is common for people to create resolutions for the new year, especially around financial planning. The new year is a great time to set financial goals and get yourself on the right track for the year. However, it is important that your financial goals are all encompassing and account for saving, investing, retirement planning, and debt elimination. While each person?s financial plans will be unique to their current and desired situation, any financial plan should incorporate the following elements in some capacity.

1. Create an Emergency Fund

An emergency fund is a pool of easily accessible money that covers your monthly expenses for 3-6 months. With our economy in a shaky recovery from a deep recession, no job is completely safe. This fund is there for more than just a rainy day but more for a hurricane that may last awhile.

2. Eliminate, pay down, and prevent debt

This task is obviously easier said than done. Between student loans, credit cards, and car loans debt is easy to accumulate but hard to eliminate. Set a plan to consistently make significant payments to your debt obligations. Paying down high interest debt is better than any investment.Most importantly, when possible, USE CASH.

3. Contribute to your retirement accounts

Most individuals are offered some form or retirement plan through their employer, likely a 401k or 403b. You can set up contributions to these retirement accounts through your Human Resources or Finance department. Some companies match employee contributions up to a certain percent or contribute regardless of employee contributions. Be sure to take full advantage of either type of contributions. Contributions to these plans under the traditional format allows all contributions to be deducted from your taxable income at the end of the year decreasing your tax bill to Uncle Sam. However, taxes are taken out when you receive money from the accounts but that won?t be until your at least 59 1/2. Although this may seem far away you are never to young to think about retirement. The best person to pay the older you is the young you.

4. Invest

After you?ve done the tasks above remaining money should be deposited into an investment account. Picking investments can be somewhat scary and there is risk involved but the reward is a higher return on your money than any savings account can provide. I won?t give any specific investment advice here but Warren Buffett and several other investing gurus recommend that the average investor invest in a mutual fund or an exchange traded fund (ETF) that?s tracks the total market. An ETF is a collection of stocks combined in a fund that can be purchased in shares like an individual stock. Investing in a mutual fund or ETF that tracks the entire stock market is essentially a bet that the market as a whole will go up over time.

There is plenty more than can be added to any financial plan. starting with the basics here will help establish a solid foundation that you can build on over time.

What are your financial goals for the year? What do you suggest for anybody who wants to get their money right?

Justin Peters is co-founder of How To Make It Moments (http://www.howtomakeitmoments.com), a blog dedicated to providing resources to aspiring entrepreneurs and profiling current entrepreneurs. How To Make It Moments include real life experiences from entrepreneurs and young professionals. Justin is located in Washington, DC.

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  • http://absolutpurpose.com/blog Brian Cox

    This isn’t a topic that should be taken lightly and Justin has hit upon the main principles of a secure financial future. Even though it is hard to imagine now with minimal investments, pretty much whatever you can afford, the time value of money will make good use of. That same rule will severely hinder your ability to grow retirement investments the more you wait. Do the math, the earlier you start the easier it is to become financially free.

  • http://www.netvoki.de Thomas Maier

    The budget is still small, but I do run a slight controlling based on the projects we run. So I can at least see where the budget goes, where to invest more and what projects are not worth the effort. Just have a look at you budget from different angles.

  • Maharps

    My goal is to start a debt free service company in 2011. My recommendation to others that want to get their money right is to read the book “Total Money Makeover” and create a financial plan for your future. Also, get a will drafted. They can be done fairly easily without a laywer if you don’t own much.

  • Anonymous

    I agree completely. Compound interest allows money to grow into large amounts over time. Start now, earn longer, save more.

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    There are no income tests or credit checks when you apply for your pension loan and you do not need to prove your income at any stage of the process.