Personal Finance for Dummies begins by asking you about your short-term and long-term financial goals. It might sound very basic, but this question really made me stop and think. Before reading this book, I was a typical twenty-something spending my paychecks and not thinking about where I financially wanted to be when I turned 30. I realized if I didn’t start paying attention, I probably would not be buying real estate or doing any extensive travel.
I decided on a short-term financial goal of a European vacation next summer and a long-term goal of buying a condo. One of the most interesting arguments in the book was that only things that appreciate in value should be financed, like education or real estate. Things that depreciate in value should be paid entirely in cash, like cars and vacations. While I think that the concept is correct, I think it would be really hard to buy a car in cash and save for a condo. But considering my other goals…it will be a long time before I even start thinking about a new car.
If you haven’t started thinking about your long and short term financial goals – now is the time to start. If you are unsure of what you want, start saving approximately 10% of your paycheck. You can at least start an emergency fund and will be on your way when you decide what your goals are.