The basics of lifestyle planning

Personal finance planning is about more than just saving and spending; it’s about adapting your financial habits to support the lifestyle that you want.

Video Transcript

- Personal finance is more than just money. It's a plan that considers one's desires, dreams, strengths, needs, and future goals. The first step in lifestyle financial planning is to make a list of all the things that will truly make you happy and see what it takes to achieve happiness, then identify the financial goals associated with them and how you plan to make that money.

It's paramount to establish good financial habits early. Measure your progress as you go along with milepost to see how well you're progressing. As you progress through life, your goals may change. And while it's impossible to foresee all of the things that will change in your life, you can certainly plan for those changes you expect to make, such as relocating or having a child.

Financial planning is a long game that may take many years to implement. The trick is to be realistic about your goals by setting a timeframe in which to achieve them. Try to live within your means and save on your short-term, must-haves, and nice-to-haves.

All too often young adults fall into the credit card debt trap, by mistaking short-term, nice-to-haves for must-haves. An important part of living within your means is choosing the right place to live. Housing will be your largest expense, consuming about 25% to 40% of your income.

Whether you buy or rent depends on your lifestyle goals and the current local housing economy. While it's generally considered better to buy a home than to rent, in some localities you might find it cheaper to pay rent than to pay large mortgage payments, taxes, and other homeowner expenses. There are many ways to keep housing costs down.

One example is to share housing expenses with others or opt for smaller and more economical housing. Choose your neighborhood wisely, keeping in mind how much it's going to cost to commute to work, transportation costs, and safety. Stay financially fit, friends.