The Difference Between Money Reality and Financial Goals

When you look at where your finances are now, you probably see the gap between your financial reality and your financial dream. In many cases, it might seem as though it will be impossible to bridge that gap and create a new financial reality that encompasses your dreams. The good news is that it’s not impossible. In fact, if you follow the steps outlined below, you could be well on your way to creating your ideal financial reality.

Break Down Big Goals

One of the factors that makes your goals seem so unattainable is the sheer grandiosity of them. But when you break these large goals down into smaller goals that can be attained in intervals, they are much easier to both visualize and achieve.

Let’s say your goal is to buy a house. To break this down into smaller goals, you can:

  • Set a goal to save the downpayment by a certain date
  • Set a goal to start saving the difference between your rent now and your mortgage, insurance, and property tax payments once you buy
  • Set a goal to improve your credit rating, so you get a better interest rate

Let’s look at another example. Say your goal is to pay off $25,000 in student loan debt. You can break this down into the following smaller goals:

  • Start living according to a budget
  • In that budget, set aside 10 percent of your income for student loan repayment
  • Pay off 10 percent of your loan balance this year, 20 percent of the balance next year, and so on

Create Steps for Accomplishing Smaller Goals

Once you’ve determined what the small goals are, you need to come up with a plan for accomplishing each of them. Using an example from above, let’s say you want to save for the downpayment on a house. Your steps toward doing so might be:

  • Save $500 a month
  • Sell any unused vehicles, electronics or other expensive items and put the money toward the downpayment savings
  • Get a part-time job during the holiday season and save your paychecks toward your downpayment

Through the creation of smaller goals and steps to take toward making them a reality, you will create a viable plan for reaching your financial ideals, and you’ll have built-in measures for accountability that keep you on track.

Staying Financially Fit

You might not think that you need to check in on your financial status when you’re just starting out in your career. But looking at where you stand financially can have both immediate and long-term benefits. This blog post will give you a few tips for staying financially fit.

Go Over Your Statements
Go over your statements whenever you receive your bills in the mail, immediately review them. By doing this, you’re taking one of the few opportunities you have to catch mistakes and fraudulent activity. You should never just pay your creditors without going over your bills with a fine tooth comb. Since most banks have stopped mailing statements to their customers, this bit of advice goes for your electronic statements, too.

Know Your Assets and Liabilities

The items and property you own, or assets, and your debts, or liabilities, together determine your individual net worth. Assets could include some of the following:

  • Bonds
  • Cars
  • Cash
  • Collectibles
  • Real Estate
  • Retirement Accounts
  • Savings
  • Stocks

Liabilities might include some of the following:

  • Auto loans
  • Credit card debt
  • Mortgage
  • Other bills
  • Student loans

On an annual basis, calculate your net worth by adding up all of your assets and subtracting your liabilities. If you just left college with student loan debt, your net worth is negative. It’s not necessarily something for which you need to be ashamed. You’ll just have to work hard to pay down the debt.
Balance Your Checkbook
Balance Your Checkbook Even though most of us rarely write checks anymore, we still need to reconcile every cent that we spend on our credit and debit cards. Prevent those nasty overdraft fees by doing the math as often as possible.

Look Over Your Credit Report
Look Over Your Credit Report In your credit report, you will find information about your credit accounts and your payment history. If you want to qualify for loans at great rates, you will need a high credit score. Experts recommend that you look at your credit report at least once a year to ensure that all of the information on it is correct. You should do another check before you apply for big purchases like vehicles and houses. You can ask for a free credit report from each of the three credit reports – Equifax, Experian, and TransUnion – once every 12 months.

Hybrid Advisors Making a Big Shift

Online Financial Advisors

The world of personal finance is changing rapidly. Many people want better financial help with the issues that they have in life. One of the most important things to plan for is retirement. Few people are saving up enough money for retirement, and you need to make sure you have a plan in place to do so. There is a huge shift going on in the industry today. In the past, financial advisors were in your local area and you went to meet them in person. As technology continues to increase in this area, a lot of financial advisors are going online. This trend is expected to increase over time.

Financial Advice

A lot of financial advice is really simple. The issue for many people is actually following the advice. Over the years, a lot of people have had issues with their finances for a variety of reasons. If you have a lot of debt, it is going to be really hard to invest money for the future. Some people are having to work multiple jobs just to pay the bills. Whatever your situation is, you need to have a plan that makes sense for your future. Working with a financial advisor can be a great way to have success in this area over time.

Robot Advisors

A new trend that is emerging in the industry is robot financial advisors. Although this sounds like something out of a fiction novel, this is actually happening across the industry. Financial advice usually comes down to a calculation, and this is something that computers are great at. Need to know how long it is until you can retire? A computer can spit that information out for you quickly. This is one of the reasons that the industry is starting to move in this direction. In the coming years, it is expected that robot advisors will continue to gain market share from typical investment advisors.

Final Thoughts

Overall, your personal finances are an essential part of your life. If you struggle with your finances, it is hard to accomplish the things that you want to in life. In addition, planning for retirement is difficult if you do not have a professional on your side. One of the biggest trends in the industry is the rise of automated online advice. A lot of people really like the simplicity of working with a person or robot online with their financial plans.