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 ‘Financial Planning’
How to Begin Planning Your Financial Future
February 4th, 2010Fees Or Commissions in Financial Planning, Which is Better? Or is That the Right Question?
February 1st, 2010
Until 15 years ago, when you dealt with a financial advisor (regardless of whether they called themselves a stockbroker, investment executive, financial planner, etc.) you paid a commission for a transaction. Of course, you desired to get some very good advice before making a transaction.
But the fee-based business has grown where the advisor does not charge you for transactions, but rather an annual fee for handling your portfolio or an hourly fee for advice. Fee based advisors say that commission advisors have an incentive to sell something to generate a commission. Commission based advisors ask why you should pay a continuous fee if your portfolio remains unchanged or loses money for long periods of time?
Who’s right? I contend that this question is not the important question. How you pay an advisor is far less important than many other factors.
When you work with a trustworthy advisor, how you pay them is a matter of which system makes sense for you and will not be determinate of the level of happiness and comfort that you have with your investments. Both the commission based and fee-based advisor can obtain and recommend the same or nearly identical investments to you.
That being said, here is a list of the five most important things you should check before you worry at all about fees or commissions:
1) Where can you check out the advisor? The financial services business is intensely regulated. Look for their regulatory agency and then go online and do some digging. This may be the SEC, FINRA, or maybe the state department of insurance. They all have websites that show if there are any complaints against the advisor and if those complaints have been resolved. Ask the advisor that you are meeting with who regulates them. Yes, this is a fair question! If an advisor is hesitant to tell you where you can check them out, then run-don’t walk-for the door! Remember just one name: Bernie Madoff.
2) Can you talk to clients that have been with the advisor for more than just a few years? A good advisor will have testimonials and even people that potential clients can call to talk to personally. Check a few of them out.
3) What area do you specialize in? You do not go to the general practitioner for heart surgery. Likewise, you should not go to a stockbroker for advice on the best safe and insured fixed income products. That will not be their specialty. Most advisors today have their niche, and for good reason: There are thousands of products and companies in each financial planning category. Today’s financial advisor cannot know them all. Make sure you are with an expert!
4) What company/companies is the advisor recommending? Check the company out (mutual fund company, stock, annuity company, etc.) that the advisor is recommending. How long have they been in business? Why do they like them? Usually, the advisor is just a conduit between you and the actual products they represent. This leads into the last question you must ask.
5) What happens if they (the advisor) disappear? If they do not have a contingency plan in place for their practice, that’s a red flag. They obviously do not have much foresight with their business plan; therefore they may not have much foresight with your money! You want to know what happens to your accounts and financial well-being if something happens to the advisor.
Finally, remember-all advisors get paid. In the ends fees verses commissions is really immaterial. Keep your eye on the five questions listed above. Remember, it’s your money-which helps determine you and your family’s well being both now and in the future.
We will spend a week shopping for the best buy on a flat screen TV, but very few people actually check out the guy or girl who is going to be steering all of their family’s money. Take some time to do your homework. You’ll be glad you did! Remember, you can’t afford mistakes!
By: Jake Yetterberg
Financial Planning Fees and Expenses – What You Don’t Know Can Hurt You
January 30th, 2010
The last few years have shown us there is little the individual investor can control in the financial world. The economy and financial markets swoon and sway with little predictability. And yet, the one part of the financial world that is in complete control of the individual investor, fees and expenses, garners little attention.
The cost of investments and guidance represent a huge opportunity for consumers. Disregarding the issue can be hazardous to your bottom line. For example, a difference of.25% (yes, that’s one quarter of one percent) in annual expenses on a portfolio can mean the difference between over $100,000 staying in your pocket or ending up in the pocket of someone else. (Based on a $100,000 initial investment and an 8% average annual return over 30 years). Even for the very wealthy that kind of money demands attention.
The fact that these costs are anything but transparent only exacerbates the problem. Most investors are surprised to find that the money they are losing doesn’t even show up on their statements. While most everyone will drive further down the road to save a couple of cents per gallon of gas most aren’t even aware of the money leaking from their future. So, the decision to take control of this part of your portfolio certainly appears to be an easy one. Identifying opportunities and implementing changes can be a little more difficult.
Investors should begin by asking themselves how much they know about what they are currently being charged. Most likely charges are not going to appear in one convenient place. Fees and expenses are usually layered and it is important to remember that nothing is free and everyone will need to get their fair share of compensation. The key word is fair. What is fair? If you are paying more than 1.25% of your net worth per year you are paying too much. The professional you choose to work with should certainly be compensated for their time and expertise. The firm they work for will take a portion of this compensation for the services they offer. Finally, any kind of managed or packaged investment will likely be compensated for time, management and administrative expenses. Mutual funds and annuities are excellent examples of these types of investments.
How do you find out what these costs are? The easiest way is to ask your financial advisor. It should be noted that any advisor that provides anything but a simple, straightforward answer to this question is throwing you a huge red flag. Either they don’t know or they don’t want you to know. In either case you need to start shopping for a new relationship. Focusing on the cost of guidance often overshadows a very important part of the discussion. What are you getting for the money? It is often lost on consumers that their financial life involves much more than simply their investment accounts.
A quality advisor is going to be able to help with issues such as taxes, healthcare choices, employer benefits, estate planning and even household budgeting. The one thing you should not get for your money is conflict of interest. Over 90% of all financial advisors pay is strictly incidental to the implementation of advice or purchase of an investment. Even more concerning are the recommendation of proprietary investments by such advisors. Should you encounter a scenario such as this again, it is probably time to start looking for a new relationship.
So the next time you look at your statement, watch the news or read the paper and feel powerless remember the one area of the financial world you can control. What you pay for investments and guidance is, indeed, the elephant in the room.
By: Adam L. Young