How to Construct a Financial Plan to Reach Your Goals
Have you ever had a big financial goal and had no idea how to tackle it? Today we’re going to get a full overview of how to reach any particular financial goal you’re looking to achieve. Episode 14 featured Melissa Fuesting of Motivation Student Nation Podcast who talked to us about the psychology behind reaching our goals.
In today’s episode we’re going to be covering how to achieve different types of financial goals.
You’ll Learn
- How to automatically save money
- The best way to make money using a savings account
- How credit affects the prices you pay for purchases on credit
Accomplishing your financial goals starts with a plan.
Cash Goal
The first type of goal we can all identify with is having a cash goal which is saving enough cash to buy something we’ve been wanting.
The key is to put the money someplace where you cannot spend it.
One of the best places to put away saved money is a high interest savings account.
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These savings accounts are different from the ones you normally find in your brick and mortar bank because they offer higher than normal interest rates.
Your typical bank gives you a .01% Interest rate annually which typically equals about 2 or 3 dollars a year.
A high interest savings account gives you much much more money in interest annually.
I’m talking over one percent instead of .01 percent.
To put it in perspective if you had $10,000 in your brick and mortar savings you would make a dollar in interest over a years time compared to making $100 by just having your money in a high interest savings account instead.
The added incentive on top of your money making more money is that separating the bank your checking and savings account means you money takes time to move from one account to another.
Because it nearly takes a week to move money from savings to checking impulse buying is impossible.
Hitting a goal that requires having a set amount of money is easy. Set up an automatic payment to be moved from your checking to your high interest savings account and let the money pile up until it’s time to buy.
Cash and Credit Goal
Meaning our credit greatly affects how much we’ll pay for the overall price of our purchase like a house or car.
Part of the equation is something we cannot control. That’s market interest rates, every now and then the Fed raises and lowers interest rates to help control consumer spending.
Raising a credit score takes long-term planning that can be completely wiped out by a single missed payment.
Credit is a game that takes time and discipline to win.
If you listened to one of the previous episodes about credit you’d know that 35% and the largest chunk of your credit score is paying you payments on-time.
The second largest factor is your utilization rate which is not going over 30% of your total available credit and becoming a risk or not paying back what you owe.
If you really think about it that means 65% of our credit score is basically being responsible with money.
If we have steady income we should build a system where all this stuff gets done automatically that way we can focus on achieving our financial goals.
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Without cash sometimes you’re at the mercy of the market. If market interest rates are high you may be stuck with higher interest rates even if you have an excellent credit score.
For the right amount of cash you can pay more upfront to get a lower interest rate and save yourself hundreds to thousands of dollars over the life of your home loan.
Paying yourself first to fuel your goals is the most important step to reaching your long-term financial goals so set that automatic withdrawal from your checking account to move to your savings account.
Make the most of your money you are putting away by putting it in an high interest savings savings account so your money can make more money during the time it takes to reach your goals.
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