Preparing yourself early for life’s big leaps

We always talk about life milestones, such as buying our first car or getting married. But we often forget that financial planning is the first step towards achieving these goals in the first place.

After all, life is a journey filled with events you expect to happen and unforeseen challenges. So, a well-crafted financial plan can help you navigate this ever-changing terrain much easier. A financial plan is essentially a document that details your financial situation (sources of income, expenses, and existing loans and debts) and your short- to long-term financial goals. Having a financial plan should guide you on your financial capacity and make adjustments on ensuring that goals are achievable.

Your goals may include major life events, like having children, pursuing higher education, or retirement. These events need to be spent for, thus having a well-thought out financial plan is needed.

Failure to plan can be detrimental to you and the overall intent, which is to make you happier that you have fulfilled your milestones. You may miss your target dates or even lose money when you keep incurring debts. You could even have a negative effect on your relationships especially if a milestone involves close family members.

This isn’t meant to scare you from even thinking of planning ahead, but rather to emphasize the importance of why you should start setting your financial milestones toward financial resilience as soon as you can. The good news is that you don’t need millions of pesos to get started! In fact, you can start today with whatever money you have now. Here are some questions you need to answer to help you achieve your milestones.

How much money do I have now? It starts by assessing your current financial situation and making a realistic monthly budget. It’s a good idea to separate what you have been spending on (essentials vs luxuries) and find out how much is left. If you have been diligently putting aside some money, or have been investing, then it would be much easier for you to spend on your milestones. If you have not, it would obviously be more challenging. But all is not lost, of course. The reason why knowing how much you have can help you gauge your next steps for the milestone you’re aiming for.

How much should I spend? Any milestone, whether getting married, buying a house or car, or sending your kids to school requires you to spend. Finding out how much each to spend requires you to dig deeper in the financial requirements of each milestone. For instance, if you’re buying a car, you have to check the overall acquisition cost of the car if you buy it in cash or via installment. Then, how much will you be budgeting for insurance, registration, and monthly gasoline. This is the same process for all other milestones. But instead of giving up if you find out that you would be spending a lot for a milestone, think of the cost as a target to achieve that motivates you to act on the need.

Where do I get the money from? Knowing is half the battle, as they say. Once you know how much you have and how much you need to spend, the next step is finding out how to get the money to spend. But before you start thinking of borrowing money from your relatives, your neighbor, or the bank, remember that borrowing has its own challenges. See first where you generate your income; is it your job? If your salary is too small, do you have a side hustle? If you’re a business owner, how much profit do you make? If the amount is still too small, you may want to pare down the cost of how much you need to spend for your target milestone.

How much time do I have? Time is a crucial factor in achieving milestones and earning the money to spend for them. Try to create a plan aimed at acquiring the resources or cash for your goals. For instance, a milestone like your first out-of-the-country vacation may see you working for several months. For longer goals, like sending a child to college, you may need to plan even longer and find other income sources, like a side hustle, if necessary.

Remember that everyone experiences a different journey, so there are no hard and fast rules to how much money you need for a specific milestone. However, it’s always a good idea to begin planning for your financial goals as soon as possible.