April is Financial Literacy Month. At Paladin Advisor Group, our mission is to help clients Champion Your Financial Life through understanding investment strategies, financial goals for day-to-day life and empowering the next generation to make smart financial decisions.
In celebration of Financial Literacy month, we’ve narrowed down some key elements that - when implemented correctly - could make a difference in how you think, feel, and interact with your money. This week the spotlight shifts from taxes to creating a spending plan that you can count on.
Why create a spending plan?
Before the pandemic began last year, the US personal savings rate was at 33% in January of 2020 - the highest ever recorded since the government began tracking it in 1959. Since January of last year, we have heard from our clients their desire to track their spending and saving habits more regularly, in order to reach financial goals and even build up an emergency fund for all of life's curve balls (and world-wide pandemics).1
Before creating a spending plan, a good place to start is by thinking of the "whys" that motivate you. Why are you making a spending plan? What are you working towards? Answers to these questions could be anything from minimizing your debt, to saving up for a vacation, or buying a new house. Keep in mind the S.M.A.R.T. steps to creating your financial goals. Tracking will be easier for you when your goals are:
If you haven't already taken some time to clearly define your financial goals, don't put it off any longer. Well-defined goals are imperative for creating an effective financial strategy.
Speaking of strategy...
After you know why you're making your spending plan and have SMART goals in mind, it's time to work out your spending plan strategy.
In addition to creating your spending plan, keep in mind the importance of paying yourself first. This can be in the form of building up your savings account or contributing more mindfully to your retirement plan account (401k, 403b or 457b). Placing money from the top of your paycheck into your retirement account is the easy way to ensure it's saved before you have the chance to spend it, and your future self will be better for it.
It's equally important to keep your emergency fund in mind. Wondering how much you should contribute to yours? Of course, the answer to this question is different for everyone. If you have dependents or you own a house, you may be more likely to face emergencies that would take a significant chunk out of your savings. To determine how much you think you should save, take a look at this article: Your Emergency Fund: How Much Is Enough?
Let us help you.
Now that you know the spending plan basics, let us help you! We're offering a complimentary consultation to help you get started on a path to Champion Your Financial Life. Book your meeting today by filling out the form here.
1. "US Personal Savings Rate." Paladin Advisor Group, 2021. www.paladinadvisorgroup.com/resource-center/money/u-s-personal-savings-rate.