Building A Financial Plan For The Future
The best way to ensure that you enjoy a financially sound future is to start planning for that future today. Building a financial plan for the future allows you to save money to achieve your long-term goals and afford the things you want. Sound financial planning remains a critical step for everyone, and it’s never too late to start.
Create a Budget
Planning for your financial future takes discipline and organization, which means starting with a budget. Creating a budget helps you understand where your money goes.
A monthly budget also includes:
- Any debt pay-off
- Household maintenance, including rent or mortgage payments, utility payments, and other costs
- Food, including groceries and dining out
- Pet costs, including food, veterinary care, and other needs
- Car maintenance, including fuel, monthly payments, and other needs
You need to account for any expenses you may have in your budget. A monthly budget also keeps track of any sources of income coming in from your job, residual income, or investment profits.
Invest in Yourself
Once you have your budget down, think about your future and what you ultimately want to do with your money. Make a list of your goals and dreams, from paying off debts to buying a dream home or starting a business. Whatever your goals are, write them down.
Once you know what you want to do in the long term, you can start breaking it into actionable pieces that you can start doing now. This keeps you motivated to spend less and stick to your budget because you are working toward concrete goals.
Save for Retirement
Saving for retirement forms an essential part of building a financial plan for the future. Generally, the older you are when you start saving for retirement, the more you need to contribute.
You will find different kinds of retirement savings accounts, but the most common include:
- A Traditional Individual Retirement Account (IRA) is an account you open and fund. Traditional IRA savings are tax-deferred, meaning you do not pay taxes on it as income until withdrawn.
- A Roth IRA is also opened and funded by you, but you pay the taxes on the money now and won’t be taxed when you withdraw them later.
- A 401(k) is a retirement account offered by an employer to employees. Depending upon the employer, you can choose pre-tax or post-tax options similar to IRAs.
Protect Your Finances With Insurance Policies
Growing wealth means protecting wealth. Insurance represents an integral part of your financial plan because it protects your investments and savings in case of an emergency.
Some of the most important types of insurance you should consider getting to protect your financial future include:
- Life insurance
- Homeowner’s or renter’s insurance
- Auto insurance
- Health insurance
- Disability insurance
You should consider insurance a defensive part of your financial plan, but protecting yourself from unforeseen problems, such as economic disruption, job loss, sickness, or death, is crucial. You want to preserve anything of high value in your life so that you and your family stay protected.
Know Your Taxes
Taxes are inevitable but understanding how they work can make them less of a burden, now and in the future. When you calculate for the future, take taxes into account.
When planning for your taxes with a Numerico tax specialist, consider these essential points:
- Tax deductions make an excellent way to reduce your taxable income, especially if a self-employed taxpayer. Itemizing your deductions for expenses incurred while doing business can reduce your taxable income significantly. Just be prepared to back those deductions up with receipts and paperwork.
- You can reduce your taxable income by investing in tax-deferred options such as a 401(k) or 403(b).
Michigan Tax Specialist | Numerico PC
Building a financial plan for the future is an investment in yourself. At Numerico in Livonia, Michigan, we remain dedicated to providing you with the knowledge and expertise needed to navigate tax preparation, business accounting, bookkeeping, and financial planning to help you reach your goals.