Setting Up House

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Setting Up House

The financial future of most people is dictated by the way they start out as independent adults. If you are going to set up house on your own or with a partner (or know someone who is), then you may find some good advice here.

Get in financial shape early on

Establish good financial habits early. They can save you lots of grief and money down the road. Additionally, according to the National Council on Family Relationships, financial disagreements were the strongest disagreement types to predict divorce. Good financial habits will go a long way toward providing peace and harmony in your home. The key to developing good financial habits is a sound lifestyle financial plan that will help you achieve your lifestyle goals. Over time, your goals will change—that’s okay. A good financial plan will allow you to change your goals as you go along. But remember, they’re your goals. Many persons become discontented because they try to achieve someone else’s goals. You’ve heard the expression "keeping up with the Joneses." This refers to trying to achieve someone else’s goals. Even if you succeed, you most likely won’t be happy. You will only be happy if you achieve your own goals.

Be realistic about your goals

You may not be able to achieve all your goals in the first week out on your own. Not even in the first year, five, or even longer. The trick is to be realistic about your goals by setting a time frame in which to achieve them. In order to achieve your goals, you need time to accumulate the required resources. You will find that you can classify your goals as short-term (one year or less), intermediate-term (two to five years out), and long-term (more than five years out). You can also group your goals by order of importance. Some are "must have," while others would be "nice to have." No one can tell you which goals are more important than other goals—let others keep up with their own Joneses. Make a list of your short-, intermediate-, and long-range "must haves" and "nice to haves." It’s important to write this down. Goals that are not written down are nothing more than wishes. Goals are achieved; wishes may or may not come true.

Live within your means

It will be easier to achieve your intermediate- and long-term "must haves" if you can economize and save on your short-term "must haves" and "nice to haves." You do this by making some short-term financial decisions regarding your current lifestyle. All too often young adults fall into the credit trap they waste years getting out of. This happens when they mistake short-term "nice to haves" for "must haves." Rule of thumb: if you don’t have the money to pay cash now, it’s not a "short-term must have." Avoid living beyond your means. You will need to save and invest in order to achieve your future goals.

To achieve your goals, you will need sufficient financial resources. These come in the form of income, savings, and investments. Whatever income you do not spend on short-term goals can be saved for future goals. If invested properly, your savings can generate more income and resources to achieve your future goals and more.