Long Term Financial Goals

If you aren’t broke and are reasonably comfortable (which is certainly possible with a software development job) then it’s easy to stop paying careful attention to your finances. However, many people in the industry find that not only are their finances tight, but that they have trouble saving for larger goals (such as retirement) and they often find that they are just a paycheck away from major financial problems. If anything, the last year SHOULD have taught you to seek more financial resilience in your life and to be better prepared than you were. However, even the preparation is a struggle. Financial considerations are not “fun” to think about for most normal people, even though they are absolutely critical. Further, the amount of information out there about finances is often so extensive and complex that you’ll often struggle to figure out what to do next, even if you are otherwise sufficiently motivated. You may also find that your long term financial goals conflict with your short term desires (or even your living requirements). Financial issues can often highlight very uncomfortable situations in your personal life (such as a difference in worldview between you and your spouse). However, you still need to deal with this stuff, or you risk it becoming a problem at an inconvenient time. Finances are one of the things that can improve or destroy your quality of life. They are also pretty easy to ignore if you are otherwise comfortable. However, if you don’t pay attention to them, financial issues can quickly wreck your plans and ruin your life if you let them. Managed properly, however, your finances can often allow you to achieve your dreams, retire earlier, or even make it possible to live a vastly different life than what you expected. Episode Breakdown Build an emergency fund. An emergency fund of 3-12 months worth of living expenses should be your number one priority. Not only does such a fund make it easier to deal with surprise expenses, but it can greatly improve your confidence. Essentially an emergency fund makes it possible to take some calculated risks that might otherwise be impossible. It also makes it easier to absorb surprise expenses, such as automobile expenses, or sudden taxes. If you are single and willing to cut expenses to the bone, you can get by with a smaller emergency fund. If you are older, have a family, or have a more specialized career path, you will probably want to have a larger fund. It all depends on your risk tolerance. Track and analyze your expenses. Tracking expenses is one of the best things you can do for your finances. Not only does it help you identify your actual spending patterns, but it can also help you detect issues such as fraud. Being aware of how you spend money can often change your spending habits for the better. Things like going out to lunch every day can really add up and you are probably not aware of what it is costing. Further, if you look at what you could have done with that money instead, you may well find a better use for it. Analyzing expenses isn’t just about reducing expenses. Rather, it’s about the value you get from those expenses. There might be something better you could do with the money. Break down and prioritize your debts (if any). While interest rates are low, debt is not the worst thing in the world, and can often be useful leverage, depending on what kind of debt it is. However, debt has to be managed. You probably should prioritize getting rid of at least some of your debt, especially if that debt isn’t particularly useful for your long term goals. For instance, credit card debt is often not used for things that actually significantly improve your life and has a high interest rate – you might want to prioritize getting rid of it. Debt prioritization is important,