Financial planning today provides major benefits tomorrow, and for the remainder of your life.
Regardless of your current income level or personal situation, learn why you must be committed to the following personal finance strategies in order to secure your financial success.
Planning now for your financial future is, quite simply, a smart thing to do. The tools and process detailed here will pave the way for anyone who is serious about conquering their debt and taking control over their financial existence.
Financial planning is how you get from point A to point B, as well as points C, D and E. Depending on where you are financially today, you no doubt have multiple goals that you wish to accomplish. “Hoping” for your luck to finally change, or “waiting” for your ship to come in, is NOT a financial plan – it’s simply a dream.
Most people get into a set routine with their finances. The longer you allow yourself to continue down the same financial road without a clear map in hand, the more you lessen your chances of realizing your financial goals.
Let’s face it, most people are not known for their patience or their planning skills, and even less people are admired for their ability to save money. No one should be surprised to learn this given how the mass media is constantly teaching people in our society to “buy it now- pay later!”
To ensure financial success, people must break away from this destructive, and weak, mind-set.
Do not make the common mistake that financial planning is only for the wealthy, or that you must already have a good sized nest egg before meeting with a financial advisor. Nothing could be farther from the truth.
However, you don’t need to pay out your hard earned money for a professional. The most effective financial planning occurs in the home at the dining room table or home office.
Common tools include the household checkbook, a pen, calculator and a piece of paper with a line down the middle. One column is titled, “Cash Coming In”, and the other column reads “Cash Going Out”.
The main goal to keep in mind is that you want to spend every dollar of your monthly income ON PAPER, before you actually spend it. This way you will plan your expenditures for the month, knowing you have set aside adequate money to cover all the fixed expenses. In addition, you will have thoughtfully allocated the remaining funds to the areas of your life that are most important to you.
Examples of important financial goals might include:
Buying a new car Saving for a down payment on a house Future college saving Dream family vacation Purchase of investment property Planning for retirement years Regardless of what your financial goals are, your chances of realizing those goals are highly dependant upon your decision to plan ahead and your willingness to take action – right here and right now.
There is a great tool available to anyone who is not comfortable with sitting down and creating a household budget on their own. This important tool is called a Personal Financial Statement.
If you’ve ever applied for a loan or credit card, you have filled out the majority of what is found on a personal financial statement. Starting immediately, you can begin using the same process that a lender uses to account for all monies coming in and going out.
Once you have completed filling out a personal financial statement, you will have all the information you need to take the financial planning process to the level – that is, creating a budget that works!
“Budgeting” gets a bum wrap. No one likes to hear the word “budget”; however, it is the process of budgeting (aka. financial planning) that will ultimately set you free and secure your financial future. Too often, people make the mistake of assuming “only broke people have to budget”. The reality is that most rich folks are rich because they budget.
The decisions you’ve made up until now are the reason you are where you are today. The decisions you make today going forward will shape your destiny. The only real question is, “Where are you going?”. Decide well.
By: Richard Gorham
Posts Tagged ‘Checkbook’
How to Begin Planning Your Financial Future
February 4th, 2010How Do I Create A Budget And Financial Plan?
January 24th, 2010
You can use the Money program to create a budget. By using Money for budgeting purposes, you can compare your actual spending to your budgeted spending. You use Money’s Budget Planner tool to set up a budget.
1. Display the Budget Planner window.
Click the Planner link, and choose Budget Planner. Money then displays the Budget Planner window.
2. Use the Budget Planner Wizard.
The Budget Planner Wizard steps you through a very thorough process for creating a budget based on your exact income, your long-term savings plans and goals, the possibility of occasional extraordinary expenses, your contractual debt payments for car loans and mortgages, and your anticipated expenses. To step through this planning process, click hyperlinks in the Budget Planner window. Read the instructions inside the windows and, when prompted, provide data by filling in fields. After you finish with the Budget Planner Wizard, you have a complete and very detailed budget.
How do I create a personal financial plan?
Money supplies a Lifetime Planner tool that in effect creates a personal financial plan for you. The Lifetime Planner is a wizard that collects and then analyzes a large volume of personal financial data concerning you and your family, your current financial situation, and your future financial aspirations. The Lifetime Planner starts with a video. Just as with the Budget Planner, read the instructions inside the windows and, when prompted, provide data by filling in fields.
Personal financial planning sounds complex, but it consists of three basic tasks: First, you need to make sure that you manage your day-to-day finances in a way that keeps your financial affairs simple and hassle free. (If you use the Money program to keep your checkbook and other financial records, you are already doing this.)
Second, personal financial planning means identifying and then prudently preparing for long-term financial objectives, such as a comfortable retirement, sending a child to college, or making a major purchase, such as a house. You can spend an enormous amount of time planning for these sorts of major events, but you don’t have to because the planning process isn’t all that difficult. In most cases, you can figure out what you need to do to retire quite easily. Numerous books have been written on the subject.
The same is true of other financial objectives-if you take advantage of well known and popularly discussed tools, it is typically not that difficult to prepare.
The third element of personal financial planning is the mitigation of financial risks where possible. This is perhaps the least understood and most overlooked task of personal financial planning. In a nutshell, you need to make sure that a personal tragedy, such as loss of life of a breadwinner or a serious illness, doesn’t become a financial tragedy.
Obviously, you can’t prevent personal tragedies. Parents die, children get terrible illnesses, and catastrophic events, sometimes forces of nature, destroy property and wreak havoc on people’s lives. However, in all of these cases, you can usually buy insurance that lets you share the cost of these financial disasters with large groups of other people. Then if you happen to become the next unfortunate victim, you will at least receive a claim payment that minimizes or eliminates the financial costs.
How do I plan for a child’s college expenses?
The goal is to save enough money in the years before a child goes off to college to pay for four or five years of tuition.
The first step is to make an estimate about what the child’s college expenses will total. Every year, major U.S. news magazines, such as US News and World Report, provide comprehensive lists of college cost information. Obtain one of these magazines and estimate what college will cost when your son or daughter attends.
After you determine the cost, you then calculate the amount you need to save. The tricky part of saving for college is that you often can’t use investment choices that deliver high real rates of return. In fact, it’s common that you will be saving for college using investment choices that don’t deliver a positive after-tax real rate of return. What this means, unfortunately, is that in many cases you can produce a fairly accurate estimate of how much you need to save for college simply by looking at the total cost of college and dividing this amount by the number of months between now and the time your child attends.
NOTE If you are beginning to save money while your child is still an infant, you may feel comfortable investing in the stock market, which will return a positive after- tax real rate of return.
By: Stephen Nelson