How much money do you want to make? Is it enough to pay off your house, send your kids to college, and take care of yourself so you never have to work again? It’s hard to answer questions like these without having some idea what your goals are.
Having clear financial goals can help motivate you when you’re slogging through the hard work of saving and investing. But before you can set financial goals, you need to figure out what they are.
Do you have all your debts under control?
If you have debts, it’s important that you not only get yourself out of debt but that you also stay out of debt. Monitor your accounts, and make sure everything is under control and making progress towards becoming debt-free.
If not, then get proactive about fixing your financial problems. A great way to do that is with budgeting tools. You can start by doing something as simple as creating a spreadsheet or app on your phone or computer where you track your income, expenses, and debts.
Are you investing regularly?
Don’t have time or can’t be bothered with investing? That might be a smart financial decision—but it isn’t going to help you reach your money goals. The earlier you start, and more frequently you contribute, generally leads to higher returns.
The average American investor (individual or through a 401(k) plan) has about $78,000 in his or her portfolio but contributes just $12,000 annually.
Is your mortgage under control?
Ask yourself if your mortgage is under control. You’ll need a complete understanding of how much interest you will pay, the total amount you owe, and when you’ll be free from it. If not, it may not be time for a vacation just yet.
Do you have an emergency fund in place?
According to Bankrate, nearly two-thirds of Americans do not have an emergency fund. If you’re one of them, don’t worry: you’re not alone. But why isn’t there a dollar in your bank account dedicated solely to emergencies? The answer is deceptively simple: life happens—and it can happen without warning or notice.
Have you started saving for retirement?
The Roth IRA and traditional IRA are two of many retirement savings accounts available. If you’re not sure where to start, choose an account based on your income level.
Although traditional IRAs have stricter eligibility requirements, there are specific tax benefits for contributing more than $5,500 (or $6,500 if you’re 50 or older) annually. For example, if you contribute up to that amount and meet other criteria in a given year, your contribution may be fully or partially deductible.