No matter your age, it’s important to have a plan when it comes to your finances. Life can change in an instant, and you need to be prepared for whatever happens. You must also be prepared to make changes to your financial plan as you start to experience major life changes such as getting married, buying a new home, having a baby, starting a business, and more. This holiday season, take our 12-day challenge to prepare for your financial future.

Day #1: Evaluate Your Finances

Take a look at your financial records. Log the following items:

  • How much debt you have, minimum payment amounts, and interest rates
  • All credit cards you own, along with payment amounts and perks of each card
  • All accounts you hold, including checking, savings, HSAs, etc. Include the total amount in each.
  • Log all savings and retirement plans and their projected growth
  • Write down any major purchases you’ve made in the past year or purchases you make monthly (this could be major appliances, roof replacement, or even weekly groceries)

Once you have all this information in front of you, you’ll be able to see where you can cut back and where you should increase your contributions (savings, retirement, emergency fund)

Day #2: Determine your net worth

Now that you’ve evaluated the state of your finances, it’s time to determine your net worth. This is the value of all your assets, minus the total of your liabilities. This is otherwise known as what you own minus what you owe. All the information you gathered on day one will help you with this challenge, but if you need additional help, there are plenty of net worth calculators online to help you. You will need to factor in:

  • All of the money you have in your accounts
  • Retirement accounts
  • Home equity/equity of properties you own
  • Car equity
  • Student loans
  • Mortgage
  • Credit card debt
  • Car loans
  • Savings bonds
  • Life insurance cash value
  • Stocks
  • Bonds
  • Jewelry (precious metals)
  • Household items

This will give you a clearer picture of the areas that are holding you back financially and how you can balance them out.

Day #3: Set SMART financial goals.

Tracking your finances is just one part of the financial journey. You now need to set goals, but not just any goals. These need to be SMART. SMART stands for:

  • Specific – You know exactly what you’re supposed to be reaching for.
  • Measurable – You will be able to tell if you’re making progress or not. Maybe this is by assigning dollar amounts or percentages of growth to your goals.
  • Achievable – These have to be realistic with your current situation. For example, most people would love to make 1 billion dollars, but that’s not the goal they would start with when they make a financial plan
  • Relevant – Your goals should reflect what you most want out of your finances, not just what you think you should be doing based on others’ actions. Maybe you’re wanting to save to open a small business while somebody else is wanting to invest in real estate. It needs to be relevant to you.
  • Time-Bound – All goals should have a start and end date. Once you hit a deadline, make another deadline to keep progress moving. Having a set date to look at in the future often makes it easier to stay on track.

Day #4: Update or Create a Budget

Depending on your goals and current life situation, creating a budget can be a yearly, twice-yearly, or even monthly occurrence. It’s important to revisit your budget every time there is a major life change, such as a:

  • New car
  • New house
  • Marriage
  • Major home improvement projects
  • New baby
  • Death in the immediate family
  • Relocating to a new town

All of these things can drastically change your month-to-month budget, so it’s important to adjust as needed. Check out our blog on some of the most popular budget plans to get you started:

Day #5: Prepare for an emergency

Many people commonly prepare to save for retirement or vacation, which is great! Others may be struggling a bit more from paycheck to paycheck but are hoping someday they can have some savings. Whichever category you’re in, it’s important to prioritize an emergency savings account whenever you can. When you’re doing your financial planning, emergencies will always be the category that can throw you off track the most due to their unexpected nature. But you don’t have to be caught completely off guard. By setting up a savings account and throwing a few dollars in each month, you’ll be better prepared for what life throws at you. For more information on starting an emergency fund, check out our blog: How to Start an Emergency Fund Before an Emergency Strikes - Availa Bank.

Day #6: Pay off your debt

Now that you’ve tracked all your expenses and debts, set goals, and created a budget, it’s time to dial down on your debt and get it paid off. Everyone has a different approach, and it really depends on what you think will work best for you. If it’s hard to make it a habit, it’s less likely you’ll be able to stick to it and pay off your debts. To get started, you can check out our other blogs covering the many different debt strategies that have been developed over the years, such as debt snowball, debt avalanche, envelope method, and more!

Day #7: Organize investments

Talk to a knowledgeable source about the options available to you. It’s best to have an expert take a look at your financial situation before you get into too many investment opportunities. Once they’ve consulted with you, they’ll be able to explain what’s in your portfolio and how it will benefit you.

Day #8: Prepare for retirement

It’s never too early to start planning for retirement. Whether you’ve just graduated from high school, are in your 40s, or are just about to hit that prime retirement age, make sure you have a plan in place. Invest in that 401k or IRA. The sooner you get things set up, the sooner you’ll be on track to a great retirement.

Day #9: Start estate planning

Along with retirement planning, it’s never a bad idea to do your estate planning early. Life is unpredictable and you never know what could happen to you. Make sure your assets are taken care of the way you want them to be taken care of. Don’t forget to review your estate plan regularly whenever there’s a major life change (marriage, death, the birth of a child, etc.).

Day #10: Invest in insurance for your assets

As we’ve been telling you, and as you likely already know, life is unpredictable! It’s important to make sure your assets are as protected as possible. Look into insurance for your assets so that you’re not left without the things that matter.

Day #11: Plan for taxes

As your financial situation changes over the years, make sure part of your financial planning includes taxes. Know that when your income changes or your debt levels change, you may be in a different tax bracket or be required to provide more information. Talk to a tax professional about ways you can maximize your tax reductions and reduce your taxable income each year to maximize your profits as much as possible.

Day #12: Review your financial plans regularly

Life is ever-changing, which means your financial plan should change too. Nobody’s plan should be identical from year to year. Always look for ways to grow and review your plan every 6-12 months to ensure everything is still on track for the future.

Now that you officially have a plan, let your local Availa banker help you take it to the next level. Whether you need to open a new savings or checking account, are interested in our CD options, or aren’t quite sure what you’re looking for yet, check us out online, give us a call, or stop into your local branch today to find the best fit for you!