Steps to Building a Strong Financial Foundation

Are you the master of your wealth? You should be!

In order to build a stable structure, you must begin with a heavy-duty financial foundation that will take care of you now while reinforcing your future goals. What do you need to do to put that structure in place? It is amazingly clear-cut. The tactics below will help to boost your monetary self-confidence and set yourself up for financial success.

Get Organized

Before you can proceed, you must be clear on where you stand financially right now. You can begin by developing a personal balance sheet. Make a list of each of your assets (what you own) and liabilities (what you owe). When you have gathered all your statistics this will give you a sense of your net worth.

Next, figure out your monthly cash flow and take a check of your credit. You can use a budgeting template like this one to help simplify the process.

Grow Your Net Worth

– Analyze your take home pay

– Make sure you are spending less than you earn. Keep track of your personal finances with a tool like Moneydesktop, which can empower you to take control of your finance and simplify your life.

– Manage your debt responsibly by making your payments on time and pay extra on all your consumer debt.

– Save money for your long-term goals. Open an employer sponsored 401(k) and make sure you take advantage of any employer matching programs.

Protect Yourself

Now that you are organized and following a growth plan you need to make sure you are financially safe. Try implementing these options.

– Build an emergency fund because life happens. It’s a must have to keep you financially viable – opposed to plunging into debt when you face an unexpected cost or other financial crisis.

– Check your insurance coverages. These types of policies will help to limit your out-of-pocket expenses when unexpected costs arise.

– Make sure you establish or update your estate plan. This may include updating your will, creating a living trust and instituting a power of attorney and a healthcare directive.

Prioritize Your Debt Reduction

Be conscious of over-extending by paying excessive interest on money you have borrowed. This can keep you from putting money toward your other financial goals. Debt repayment is a perfect way to start building your financial foundation. If you are interested in implementing a fast-tracked debt repayment strategy try the debt snowball method or another financial strategy to reduce your interest rates.

Define your financial goals

Now that you have put all the pieces together for your financial foundation it’s time to ask yourself what you want for both short and long term. Remember, your goals should be SMART: Specific, Measurable, Achievable, Realistic and Time-bound. Below are a few concepts to help you get started.

– Save for a down payment for a home

– Build retirement fund

– Save for children’s college

– Set up an emergency fund

– Save for bucket list vacations

– Become financially free

Now Let’s Make it Happen

– Be disciplined: Stick to the plan

– Maintain a balanced budget. You can’t be financially healthy if you are spending more than you earn.

– Automate your finances (regular money transfers from checking to savings, and online bill pay)

As you can see, constructing a financial foundation takes immense focus and determination. If you follow your step-by-step process you can’t help but see results. Most importantly you will begin to gain confidence in your capacity to create and stick to your new healthy financial life.

3 Ways a Teenage Can Acquire Wealth and Maintain Financial Sustainability

A man’s success can be recognized by the legitimate means in which he gains beneficial things. This might be as result of effort and self-determination. To some people, it is otherwise because they believe success comes from the approval of the Supreme Being. Wealth sometimes can be described simply as the ability for an individual to meet up with his/her desires without limitations.

Millions of people living in the world today believe in having hands on deck to achieve their goals and what matters is, do they really work for the sustainable goal?

Perhaps, about 5% of the people in this world acquire wealth to sustain and provide their demands at any given time. They are known to be the world’s most influential people. Their achievements might not really depend on the hardship but simply as a result of self-determination to produce services for the general population to utilize.

In this article, we provide three (3) ways to acquire sustainable wealth to suit people’s prospective desires. However these ways are categorized amongst three groups namely the inventors, investors and salary earning groups.

The Inventors group: This group can be found amongst popular artistes such as art celebrities, actors, musicians and inventors. They normally work for the passion which at later time, projects them to fame that attracts wealth for them. Sometimes, their wealth is not substantial because of improper management. Reason is because majority of people in this group are teenagers who doesn’t believe in seeking for job. They find it easy to go for their passion but lack of knowledge in the managerial aspect would eventually lead them to financial instability.

The Salary Earning Group: This people work for an agreed terms and period for their employers. When they meet their job requirements, they get paid for the specific job. Either as a government or a private sector worker, they are dependent on their monthly, weekly or daily salary which often limits them to their desire.

A teenage in this group sometimes find it difficult to meet up with their hastening needs as they end up seeking for leverages, loans and mortgages which results to debt. At most point they are caged for a fixed period in other to achieve their long term desires. Only 30% of people in this group step up to build other sources of income for themselves.

The Investors group: This set of people believes that every day to day activities of the world depends on business transactions and risks.

However not many of them succeeds in this path. Only few who believe that risk is a companion in every business dealings scale along through.

This group of people invests at a minimal rate and gradually attains a higher level of wealth. They focus on the long term goal which produces huge and sustainable wealth than other groups above. They are the owners and employers of people who make wealth for them on daily basis.

Attaining wealth depends on the variety of group you choose to belong. Any one of these groups can eventually land you to wealth but it takes wisdom and understanding to manage its proceedings in other to sustain it for the future.

Wealth Building and DIY Financial Planning: Being Your Own Financial Advisor, A Good Idea?

For too long, too many people have handed over responsibility for their investment decisions almost entirely to their financial advisors. This is a bad idea. No one is going to manage your own money as well as potentially you could. The way I see it, anything you can do to create a better life for yourself and your dependents is fair game. So, becoming financially literate and reducing any over-dependency on financial advisors is part of this over-arching objective.

Becoming financially literate not only empowers you and your finances but sets a really good, much-needed example for those around you. In my view, “Becoming 100% financially literate” is something that warrants being on everybody’s list of top lifetime goals.

No Such Thing as a Free Lunch

Have you ever wondered how your financial advisor was getting paid? You probably had a suspicion some financial institution was greasing his palm. Well, as the saying goes, there really is no such thing as a free lunch. Beneath the pin-striped suit lies the thinly-disguised commissions and fees structure that has rotten the financial services industry to the core.

Even now, with financial institutions heavily regulated and the onus on your financial advisor to disclose to you the commissions and fees they get paid for a transaction, this can still result in you feeling uncomfortable and wary, and leave you with a distinct bad taste in your mouth.

After the recent global financial meltdown there is a huge question mark about the validity, integrity and systemic over-reliance on the financial services industry. Instead of being obligated to put your financial interests ahead of their own and create the best financial plan for you, financial advisors are only required by law not to sell you something that’s utterly unsuitable. This combined with the need to make a buck can sometimes mean your best interests aren’t always at heart. As this article will show, there has never been a more apt time to become financially literate and undertake the process of becoming your own financial advisor.

Many financial service providers are either focused on a) commissions or b) service fees. In turn they impart some so-so financial advice and deliver middling returns on investment. Commission-based “financial advisors” are working for commissions paid to them by a brokerage firm, mutual fund company, insurance company etc. Fee-based financial advisors are selling their skills and time for hourly or à la carte rate.

Of the two distinct approaches, fee-based financial advice is the lesser of two evils so to speak. However, commissioned-based services may very well be the most suitable for a small investor. This is particularly true in the case of a smaller investment portfolio where less active management is required. In this instance, paying the occasional commission is probably not going to be the ruin of the portfolio’s returns over the long-term.

Many financial advisors are now what they call “fee based” (i.e. they earn their crust from both fees paid by you and commissions). True fee-only financial planners are still a rare breed. Regrettably a very high percentage of financial planners are not working for you but are essentially sales people for financial institutions flogging financial products for commission. They consciously or unconsciously will tend to sell you a product that pays them the highest commission. So, oftentimes their agenda and yours are completely different.

One Trick Product Ponies

Oftentimes, the only product(s) a financial advisor understands is the one he/she is selling. An insurance agent will promote insurance products enthusiastically whilst your stockbroker will push individual stocks or a basket of shares. In both instances, neither may be aware of your complete financial situation and hence are incapable of giving you advice. The best use of your money at that moment could be to reduce your debts or build up an emergency fund.

Good financial planning is not so much about trying to beat the market or multiplying your wealth. It’s really about making sure your portfolio is well-diversified and that other aspects of your finances – budgets, credit ratings, insurance cover, tax planning, estate planning and retirement accounts – are in the best possible shape. So proper financial planning encompasses more than investments. It should also allow you to protect your assets, minimize your taxes, and take care of your dependents etc., all the while growing your wealth over time.

Your average commission-based financial advisor isn’t likely to think about the big financial picture. On the other hand, fee-only financial advisors are likely to be more objective at analysing entire portfolios.

When to Get Professional Advice

If are you are going to do some DIY financial planning than you will need time, education, experience, objectivity and the inclination to achieve the same level of competence offered by many professionals. To be frank, very few average-joe investors have it in them to become their own financial advisors. They simply aren’t that way inclined and are too busy getting on with their day-to-day lives. So, you need to be brutally honest with yourself about the level of financial literacy you have as you create and implement your financial plans. You can’t afford to punch above your weight, make costly mistakes and possibly suffer a financial knock-out!

So, whilst I think it’s a great idea to strive to become your own financial advisor I do think it’s important to point out that I also believe it’s crucial to have a team of Grade A financial professionals (financial/tax/legal experts) in place whom you can turn to for critical advice.

There are times that you will need a second, more experienced opinion than your DIY Financial Advisory skills may be capable of. Here are a just a few examples of when it’s useful to get professional advice:

  1. When you’re transitioning from one stage of life into another (getting married, having kids, retiring, getting divorced, etc)
  2. Any major financial transaction such as the purchase of a property, buying or selling a business, receiving an inheritance, etc.
  3. When you are at a financial impasse or suffering from inertia and unclear about what to do next.
  4. When you’re looking for the best way to protect your family in the event of an accident, illness or death;
  5. In times of huge economic and market change.

Conclusion:

To become financially literate will require you to become knowledgeable on the financial requirements/constraints you have and the strategies, tools and techniques you will need to achieve your goals. As you delve into the complexity of DIY financial planning and building wealth, you will quickly realize why it is a full-time occupation for even an average financial planner. The question is whether you want to become an expert or whether you prefer to hand-off this financial responsibility to someone else…someone else that may or may not have your best interest entirely in mind. Either which way, this is a decision not to be taken lightly.