We all have goals and dreams for the future. Whether you want to buy your first home, or are planning to open your own business, money is probably one of your primary considerations. This is just one reason why you need to create and maintain a strong, yet flexible, financial plan. Your plan is a tool that helps you get from where you are now, to where you want to be in the future.

Plan to confidently achieve your goals by avoiding these five financial mistakes:

1.     Not budgeting: Thinking that you have ‘enough’, or knowing you don’t, isn’t reason for not maintaining a budget. There are many online tools that make knowing what’s coming in and what’s going out easy and efficient. After budgeting for a few months, you may be surprised to learn how much you spend on your cable bill, lattes and eating out. By maintaining a budget and making necessary changes, you may be able to sock away more for your financial goals.

If that’s not reason enough, job layoffs or other sudden expenses can happen when you least expect it. Maintaining and reviewing your budget can help ensure you set aside extra cash in the event of such financial strain. The rule of thumb is to have three to six months of living expenses saved.

2.     Delaying saving for retirement: Patience is not a virtue when it comes to starting your retirement savings. As quickly as you’re eligible, be sure to take advantage of any retirement plan offered by your employer - contributing at least enough to earn the maximum match (if one is offered). The younger you are when you start, the more time your money will have to multiply.

If you’re self-employed or your company doesn’t offer a 401(k), make sure you’re still saving for retirement by setting up an IRA (Individual Retirement Account). You won’t receive a matching contribution, but you’ll still enjoy tax benefits and possibly greater flexibility than the 401(k).

3.     Tapping your retirement savings for non-emergency needs: Taking money from your retirement account is like borrowing from your future needs to pay for your present wants. Before the age of 59 ½, withdrawals from these accounts often have stiff penalties and tax costs. It’s best to avoid using these funds. Unfortunately no matter how careful you are with your finances, job layoffs, hospital visits and home repairs can happen when you least expect them. For those true emergencies it’s important to build a financial safety net with an emergency fund. The general rule of thumb is to keep three to six months of living expenses in an emergency account to avoid tapping into your retirement savings.

4.     Not being properly insured: What would happen to your income, assets and loved ones in the event of disability or death? To protect yourself and your loved ones, it’s essential to make sure you’re insured against possible financial losses.

Although you may not think you need insurance when you’re young and single, at this time your age and likely good health may make it the best time to buy. If your debt is under control, and your emergency fund is established, consider purchasing disability, life and long-term care insurance. Speak with a financial professional to help fill your coverage gaps and make sure you review your coverage regularly.

5.     ‘Setting and forgetting’ investments: It’s important to take time to periodically review your investments for a few reasons. One, your risk tolerance for investments changes over your lifetime, usually being greater when you’re younger and smaller when you’re older. Two, as you advance in life, your goals and investments will need to be updated to reflect changes such as raises, new jobs, moves and new family members. To make sure you’re maximizing your earning potential and that your investments are accurately reflecting your goals and risk tolerance, plan to meet with a trusted financial representative before one of these milestones or at least annually.

Financial planning can seem complex, but with help from the right team, including a trusted financial professional, you can welcome the future with confidence.

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Article prepared by Northwestern Mutual with the cooperation of Kanan Sachdeva. Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company (NM) (life and disability insurance, annuities, and life insurance with long-term care benefits), Milwaukee, Wisconsin, and its subsidiaries. Securities are offered through Northwestern Mutual Investment Services, LLC (NMIS), a subsidiary of NM, broker-dealer, registered investment adviser, member of FINRA and SIPC. Kanan Sachdeva is an agent of NM and registered representative of the NMIS based in Westborough, MA. To contact Kanan Sachdeva, please call (781) 248-8640, email her at kanan.sachdeva@nm.com or visit her website at kanansachdeva.com.

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