Thinking Long Term
It is important to establish self control and discipline into your fiscal plans early in life as to set you on a path of future financial success. Without a clear picture of your financial goals, you leave your future up to chance which is not the logical way to go. Cultivating long term thinking into your financial management plan will put actions in place to secure your financial future.
Put yourself on a path to Financial Security
Here are the 4 steps recommend for credit success:
- Start by getting your current credit picture.
- Educate yourself about credit and credit scores.
- Set a plan that focuses on fixing your specific credit problems.
- Keep tabs on your credit so you know if your plan is working.
Step 1 – Get your current snapshot of your credit. Visit www.annualcreditreport.com to get a free credit report and know your starting point. A credit report is a compiled credit history report of accounts and payments you have. If you are interested in your credit score again visit www.annualcreditreport.com. Your score will cost $7.00 to retrieve - Credit Score is also your FICO score and ranges between 301-850. A credit score is a number that helps lenders determine how well you've managed your financial obligations in the past. It's determined by the credit agencies based on the information from your credit report.
Step 2 – Get smart. Don't go about trying to improve your credit blindly, start by understanding the basic do's and don'ts of credit management. www.allywalletwise.com has a wealth of credit education information that can help you become knowledgeable about managing your credit.
Step 3 – Build your plan. After you've become knowledgeable on your credit, you can take the next steps and attack your credit problems. If you followed step 1, you already know what's in your score – and that your length of credit history and payment history are areas of your credit profile that need improvement.
Step 4 – check your status. You'd be surprised to know how many people only check on their credit when making a major purchase. If there's a problem, finding out just before a purchase doesn't leave much time to fix the problem. We recommend checking your credit twice a year and at least 6 months before making a major purchase.
Estimate your pension or retirement fund
Effective planning starts well before retirement age. Important calculations need to be made to determine what it will take to survive financially throughout the retirement years.
Your pension or retirement savings plan are an essential part of your future financial security. It is important to understand how your plan works and what benefits you will receive. Just as you would keep track of money that you put in a bank or other financial institution, it is in your best interest to keep track of your pension and/or retirement benefits.
Things you should know about your pension /retirement plan:
- What are the different types of pension / retirement plans
- What information you can get about your plan
- When and how you can receive retirement benefits
- What to do if you have a question or find a mistake
- The responsibilities of those who manage the plan and its investments
- Your responsibilities to understand and monitor your plan
- Specific circumstances such as how a divorce or change of employer ownership may affect your pension / retirement benefit
Know your Social Security benefits
Like your retirement fund, it’s important to understand any and all benefits in which you qualify for. Due to the volatility of Social Security, younger generations of Americans face a strong likelihood that Social Security benefits will be nonexistent by the time they’re ready to retire. This places a stronger emphasis on saving to supplement the potential loss of Social Security benefits.
Contribute to a 401(k) and/or an IRA
A 401(k) plan is the common name in the USA for the tax-qualified, defined-contribution pension account defined in subsection 401(k) of the Internal Revenue Code. Under the plan, retirement savings contributions are provided (and sometimes proportionately matched) by an employer, deducted from the employee's paycheck before taxation (therefore tax-deferred until withdrawn during retirement), and limited to a maximum pre-tax annual contribution of $17,500 (as of 2013). The average American contributes 4% - 6% of their salary to their 401(k) retirement plan.
An IRA or Individual Retirement Account is an account set up at a financial institution that allows an individual to save for retirement with tax-free growth or on a tax-deferred basis. There are three main types of IRAs—Traditional, Roth, and Rollover—each with different advantages.
Like Murphy’s Law says – Anything that can go wrong will go wrong. Be prepared for the worst
- Know all of your insurance coverage - What are you covered for in your life, home, car, cell phone, disability and health insurance (dental and vision too)
- Update beneficiary designation and prepare a will / testament - see what NOT to do here
- Organize financial records - Always keep a record of your assets in your will and testament to reduce the hassle for your love ones after you have passed. Doing so will smooth the legal process for the loved ones and reduce potential fees associated.