MSU Extension

Remember when you sat behind the wheel of a car for the first time? Were you nervous or anxious? Did you thoroughly go through your check list of adjusting the seat, aligning the mirrors, checking your blind spots? Do you still do that? Do you have a routine? Do you still feel anxious or nervous? Probably not.

More than likely you feel comfortable driving now because you have developed habits that put you in a safe environment and allow you to react to sudden changes. Driving now may even feel easy or monotonous. That is how you should feel when managing your money and finances. It should be like a Sunday drive; comfortable, easy and aware of any obstacles. But how do you navigate down the road to financial freedom feeling this way? Listed below are some tips from Michigan State University Extension to get in the comfort lane with your finances.

Look far down the road

Learning to drive early on we are taught to set our sights down the road and not right in front of the hood. Your focus is not just staying within the lines beside you, but anticipating what is on the horizon. This is true for managing your money. Set long range financial goals early on and stick with them. Plan for retirement now and budget how much you’d like at retirement, then work back to what you’ll need to be saving now. This should fit into your current financial budget. Also, don’t fixate on one spot, keep scanning the horizon looking for obstacles and opportunities on the road ahead.

Set it on cruise control

Once you have a plan, have the financial engine of time and small incremental payment pistons work for you. If you set up direct withdrawal from your savings, bills will be paid on time. You can also have automatic deposit from your pay check into your 401k or 403b. You should not feel these affects greatly from monthly or weekly take home pay. It will be like telephone poles ticking by. Consider that money already spent that is fueling you down the road to the place you want to be. Small payments over a long period of time can add up quickly and should not slow you down.

Track the curves

There will be bad weather, blowouts, hills, valleys and curves on this journey. You will need to keep your eyes open for these obstacles and adjust accordingly. Are you planning to pay for college, a car or a home? What if you lose your job, have another child or a family member needs medical attention? Plan for the worst by preparing for it. You can do that by having a spare tire of savings in the back. It is recommended you have eight months to a year of savings in your account to cover all bills and living expenses. Having that spare “savings” should keep you on the road during the rough patch and not get you off track from your destination. Hopefully you will be back up to speed quickly with little lost time in your finances.

Adjust your speed

You will not always be in the fast lane of wealth and prosperity, so you will need to adjust your spending and saving. Your speed, or amount of risk you take, may be higher when you are younger because you have time to make up for possible market loses or job changes. However, as you get closer to retirement, you may get more conservative with your money. This could include slowing down contributions to riskier funds or making larger payments towards retirement. You may get a raise at work or may enter a new profession that brings in additional income that can increase your savings and contributions. The key is to pay attention to your speed (your money). You will have to make adjustments in life.

On the road to financial freedom, you want to be on easy street. To get there will take discipline, planning and good habits. It may take time to develop those habits, so don’t get discouraged if you take a detour or two. Just like driving, it takes time behind the wheel and many experiences to gain better control and feel for your car and the road. Just keep driving to learn more.

For more information on fiscal management or youth money management, please visit the MSU Extension and Michigan 4-H Youth Development websites.