The Importance of Long-term Financial Planning for Managing Debt

The Importance of Long-term Financial Planning for Managing Debt
0 Flares 0 Flares ×

We all have future goals that we want to achieve at various times in our lives. For us, we talk about planning for our children’s education, planning for our retirement, as well as some other goals that fall somewhere in the middle.

One thing’s for sure, all of this planning and goal-setting can easily be derailed by having too much debt. Realizing this, I want to try to make more long-term financial goals as well as learning how to better manage my debt in the process. So, how do I do this??

While I continue to manage my ongoing debt, I also need to be planning for the future, but how do I do both at the same time? What I have learned is that there are some short-term goals that pertain to keeping my debt in check now so that it won’t get out of control in the future. Starting with the dual goal of minimizing my debt and saving for the future – here is how I plan to put this action in motion.

Consult a Financial Advisor

One of the ways that I think will help with these financial decisions is to get in contact with a financial advisor. Financial advisors are not only effective in as siting us with our long term goals, but also very good at helping us implement our short term goals. Contacting a financial professional to help set your long term goals, can then also include a plan for how you will set your more immediate goals, which is likely to include a plan for debt-relief or debt-management as you go along.

While you already will have a vision of what your future will look like in terms of what you want to accomplish, your advisor is also able to look at the broader picture and identify ways that will help you along the way. Together, you can find methods of reducing your spending, increase your saving, and ultimately pay down your debts faster as well as other personal financial planning goals you may have. You can also visit some of the free debt management associations provided free of charge by the government, such as the Credit Counselling Society.

Here are some steps towards becoming debt free AND for planning for the future:

1) Assess your Finances

By assessing your current finances, which may or may not include a lot of debt, you are able to devise a financial plan moving forward. Making a list of all of your outstanding debts, including details about how much you pay per month – as well as the amount of interest you pay, is a very worthwhile step. Realizing how much you are actually paying in interest is key to this process, because if you find you are paying way too much there may be methods of adjusting your payment plan or loan type that can mean lessening some of the interest. Ultimately, this can help you save more money and not accumulate more debt. Compiling a list of all debts, and totalling them all will also give you a better idea about how much you have to pay each month and each year. Again, restructuring these payments can be a good way of managing your debts and lowering your interest charges.

2) Setting Priorities

As mentioned, prioritizing your financial plan in terms of which goals and actions need more immediate attention will help you as you keep your long term goals in tact, while managing your debt at the same time. If you decide to save more and pay less in terms of ongoing bills, your debt level could rise quite significantly. With a lot of outstanding debt – and maybe even some missed payments, your credit history is also likely to suffer. In turn, with a poor credit score, it will be challenging to obtain future credit and this can mean upsetting your long-term goals.

3) Establishing a Goal Timeline

Just like we did earlier this year, it’s important to challenge ourselves and set some financial targets. By establishing a timeline for both your short and long-term goals, not only are you more prepared and organized – you have that motivation and that glimpse of the finish line. It is important to set realistic deadlines however, for achieving these goals and a financial advisor can also help you arrive at these decisions. If you keep to a payment schedule as best as you can, however you find you are struggling to meet these deadlines, learning more about how to adjust your payment schedule or the type of loan, can help you as you are managing your debt and keeping aligned with your future goals.

Ultimately, what I have learned is that it is extremely important to maintain a balance between both short and long term financial goals and it doesn’t have to be one or the other. In fact, ignoring one goal over the other can actually get you into some financial trouble. I have also realized that is it important not to let financial difficulties go on for too long. It is far better to ask for help or come up with another plan of action that will help you control your debt and stick to your long term goals as much as possible.

Overall, having these long term goals is what keeps many of us motivated to save and to work hard. With out having both short term goals, like debt management – these future aspirations may not be possible at all.

 

Leave a Reply

Your email address will not be published. Required fields are marked *