Have you ever met someone who seems like they have it all together—especially their finances? You know, the person with a perfect credit score, a large 401k, and who paid off their student loans in five years? It’s hard not to be jealous of their financial independence. Well, here’s the good news: you can be that person too!
What’s the secret? Intentional financial planning. Establishing a solid financial plan will allow you to reach your life goals, including paying off debt, saving money, affording those big-ticket items, or buying a home.
So What Do We Mean By “Intentional?”
You might be thinking to yourself, “Well, if I already have a financial plan, doesn’t that mean I’m already planning intentionally?” But being intentional with your finances going further than putting together a plan. It’s about being in complete control over your finances and being mindful rather than impulsive when making decisions. Intentional financial planning isn’t about depriving yourself of spending. Instead, intentional financial planners know that they need to be smart about big purchases, always planning ahead to stay in control of their finances.
How Do I Plan With Intent?
Define Your Financial Goals
Having goals lays the foundation for success in most areas of life, and financial success is no exception! It’s no surprise that you have to know what you’re trying to achieve in order to achieve it.
That being said, when it comes to financial goals, you’ll want to make sure that your goals are well-defined and put in order of importance. Ambitious goals are great, but to achieve them, it helps to break them down into smaller chunks. “I want to be debt-free” is a worthwhile goal, but phrasing it more intentionally, like “I want to pay off my student loan debt in the next three years,” is even better! This way, you won’t become overwhelmed trying to figure out how to achieve a big, nebulous goal and can stay focused on something concrete.
Figure Out Where Your Money Is Going
Financial goals are only attainable if you have a good understanding of your financial situation. After all, you wouldn’t be able to bake a cake if you didn’t have a good understanding of the recipe you were following! Getting the big picture of your monthly cash flow (i.e., what’s coming out and what’s coming in) is the foundation of intentional financial planning and the start of establishing an active budget.
Align Your Budget With Your Financial Goals
When it comes to budgeting, one size does not fit all, so it’s essential to do the research and figure out which budgeting method is right for you. Perhaps you prefer the 50/30/20 method, or maybe cash envelopes have kept you accountable. Either way, a precise budget allows you to create short-, medium-, and long-term plans that align with your financial goals. For example, here’s what you might want to think about when budgeting for the two most common goals:
Pay Off Debt
Like budgeting, the method you use to pay off debt should be unique to your financial needs. That said, there are still a few best practices you can follow. First and foremost, you’ll want to tackle your “toxic,” high-interest debts—think payday loans, rent-to-own payments, credit card balances, and title loans. The faster you can pay these off, the better, as the high interest rates could lead you to repay two or three times more than what you initially borrowed!
Consider a personal loan to consolidate your debt if you’re struggling with multiple payments and interest rates. Taking out a personal loan can help you manage your finances better, as multiple (potentially fluctuating) payments are condensed into one fixed monthly payment. Personal loans also tend to have lower interest rates, which can save you potentially thousands of dollars. No matter how you choose to pay off your debt, be consistent with your payments to see this goal through!
Start a Rainy Day Fund
Let’s face it: life is unpredictable. One day your car is running perfectly, and the next, your brakes need repair. Or maybe you broke your arm and needed money to pay your unexpected medical bills. These situations are precisely why everyone needs a rainy day or emergency fund—a savings account exclusively for those unanticipated expenses. Set a goal of saving 3 to 6 months of your typical monthly expenses, and you’ll likely have enough money to weather a financial rainstorm in the future.
Keep an Eye on Your Credit
As much as we’d like to forget about it sometimes, our credit scores play an essential role in our lives. With intentional financial planning, keeping an eye out for changes in your score and your credit reports is crucial.
You can get a free copy of your official reports once per year from each of the three big credit agencies (Equifax, TransUnion, and Experian) at AnnualCreditReport.com. Double- and triple- check to ensure that there aren’t any discrepancies between your credit reports and your records. If there are, you’ll need to contact the agency reporting them. Even one small mistake can result in a large drop in your score!
It’s also good to check in on your score after you’ve taken a major financial action, such as paying off a loan or adding a credit card. These events should reflect a difference in your score shortly after.
Learn and Grow from Your Mistakes
As you work on implementing your financial plan, you may make some mistakes along the way, and that’s okay! There will be times where you’ll want to splurge on a big-ticket item or other times where your financial plan feels like more of a hindrance than a help. As long as you keep your goals in mind and make an effort to bounce back quickly from your mistakes, you’ll always be on the right track. Mistakes serve to teach us about ourselves and help us make plans to avoid making the same one twice. Take the lessons you’ve learned and use them to fuel your future financial growth!
Looking to jumpstart your intentional financial plan? Consider a personal loan from Credit Direct! Apply online to check offers with no effect to credit score. Our experienced loan agents can help you find the right personal loan to set you up on the path to financial success.