Basics of Financial Planning - 5 Simple Steps to Success!

I have been asked by many people over the past few years this question, "What do I need to do first in order to get my personal finances together?"

When people first started asking me this question, I have to be honest I wasn't sure what to tell them.

Now that some time has passed though, I feel as though the ANSWER to this question is quite simple.

What I mean to say is that the ANSWER is simple, but what trips people up isn't the ANSWER but the
ACTION.

So what I am going to do for you today is answer the question: "What do I need to do first in order to get my personal finances together?" by supplying you with some basic ACTION steps to get you started in the right direction.

STEP 1 - Determine Your Values.

This step may seem a little out of place for financial planning. Most people ask me, "What do my values have to do with my finances?"

I say to them, "Stop for a minute and think about it, is there anything more important than your values?"

All your decisions are based on your own personal set of values. Where you live, what you drive, how much and where you spend your money, what you focus your time and energy on - are all affected by your values.

This is why once I understood Step 1; I could tell people with one hundred percent certainty that once you have a clear picture of what you value most in your life - you'll be better able to figure out how to create your personal financial plan.

At this point you need to take an action step: I want you to take about 30 minutes and write down what your top 5 values are. Remember, we are talking about values not goals.

Values are security, happiness and freedom. Goals are pay off mortgage, be debt free, etc... Once you have figured out your top 5 goals you are well on your way to personal financial success.

STEP 2 - Determine Your Goals.

Now that you know what you value in life, it is time to base your goals on these values.
What I mean by that is if you chose, Security as one of your values, then one of your financial goals could be to start putting aside 10 % of your income for an emergency account.

Another example would be if you chose Excitement as one of your value, then one of your financial goals would be to start putting aside $50 a week aside to take your family on a monthly trip.

Whatever you want to do that is in line with your values needs to be considered.

To get you started, I would take your five Values and chose 3-5 quantifiable, goals that you would like to accomplish for each value.

STEP 3 - Get Organized

Now that you have a better understanding of yourself and what you want based on your values you can begin to focus on your financial situation.

The reason, Step 3 - Get Organized is after determine your values and goals is because, this is the hardest part of the whole process.

Being that this is the hardest part of the process, you can now look back at your values and goals and have some motivation to keep you on track.

Getting organized sounds harder that it is, especially when it comes to personal finances.

The best way to get a handle on your total financial situation is create a system for filing and keeping all your personal financial documents so you know where they are and can reference them fairly easy if needed.

I recommend using a hanging file folder system. All you need is a hanging file folder box/crate, about 15 hanging file folder, and about 100 manila folders.

The most important items that you will need to track are: Taxes (7 years back), Retirement Accounts, Social Security, Investment Accounts, Savings and Checking Accounts, Household accounts, Credit Card Debts, Other Liabilities (debts other than credit cards and mortgage), Insurance. These 9 accounts are the most important and will help you have a better understanding of your total financial picture.

So your action step at this time is to create a filing system so that you can store, access and understand your personal financial documents. Don't skip this step, it is the most important of the five.

STEP 4 - Determine Your Plan/Budget - Retirement, Savings, Investments, and Tithing

Once you have a better picture of your current financial situation. It is time to be honest with yourself and decide whether you think you are on the right track or you need to overhaul your financial plan.

Most people at this point have decided that they need a complete overhaul. Again, don't get discouraged, because this isn't as hard as most people make it out to be.

Determining your Plan/Budget is really just decided what your priorities are and where you money needs to go!

The hard part about this is making sure you are paying the most important people first. I make my priorities Self, Bills, Cost of Living, Fun/Excitement.

When I say Self - I mean "Paying myself first!" Taking a percentage of my hard earned dollars out of my paycheck and dividing in up between saving, investing, and tithing. I pay myself first because I am the most important in my life.

When I say Bills - I mean fixed expenses that you pay month to month. Mortgage payment, gas, water, power, etc.... Things that very rarely change month to month.

When I say Cost of Living - I mean variable expenses that fluctuate month to month. Groceries, dining out, vehicle gas, etc... Things that change month to month.

When I say Fun/Excitement - I mean expenses for things that I want to buy like, golf clubs, cars, guns, etc. Stuff that you want.

Over time you can create a budget yourself or tell a CPA exactly what you want and they can develop a budgeting system that you can use to keep track of what you spend and then you can adjust it yearly as needed.

STEP 5 - Implement Your Plan

Now that you have taken the time to figure out what your values and goals are. You have developed a system for tracking all of your financial information and created a budget based on your values and goals, you have to take action steps to achieving them. This will seem like the hardest part of the whole process but just remember that all things that are worth doing and getting better at take time.

Make a commitment to yourself to take small actions daily to move closer to your ideal financial situation. This process may take up to 12 months.

The question you need to ask yourself though is, would you rather be in the same situation financially in 12 months or would you like to be 5 steps ahead.

It's up to you to make that decision. I hope this has been helpful and look forward to your comments.

Avoiding Retirement Pitfalls 4 Steps to Sound Financial Planning

Many investors, look toward retirement with rose colored glasses and not much more. They tell themselves they are doing the best they can, but is this really enough?

In The 6 Pitfalls of Retirement Investing, we count the "lack of planning" as the number two pitfall of retirement success. Why? Because of the fact that we have witnessed countless individuals who think they have a retirement plan in place, but have never actually taken the time to fully understand or properly analyze their investment strategies for themselves.

More often than not, an individual will rely on the advice of an unscrupulous financial advisor or investment broker without having a full understanding for themselves. This rather blind way of thinking often leads to financial ruin.

You Can Start Now

So, what's the answer here? Possibly you are new to the concept of financial investment strategies. Maybe you have a nest egg started, or maybe you are in your 50's and are trying to scrimp and save in order to play catch-up. Whichever end of the spectrum you are coming from, the bottom line is this: You are starting to think about your retirement. You are wondering about the potential success or failure of your planning (or lack of planning). We've got good news. That's a perfect place to start. You are already miles ahead of many, who are either fully relying on what they already have in place or are living in denial, hoping that somehow, things will magically fall into place for them.

Starting from the beginning, let's take off the rose colored glasses. Here are 4 steps to get you on the right track to sound financial planning, regardless where you are right now.

Step 1: Stop Blindly Relying on Your Broker - If you are currently using an investment broker or financial advisor, it's time to "re-interview" them. You can start by downloading our Full Disclosure and Transparency Fee Chart. Understanding how your money is being handled and exactly what fees you are paying is the first step in this journey. Why? Because by presenting this disclosure to your brokerage firm you will instantly gain insight into the integrity of the company that is handling your finances. If your broker gladly complies, you can move on from there. If not, it may be time to find a new investment broker. Being actively involved in your finances and investments, and demanding a higher level of commitment and disclosure from your broker will start you on the right path to financial and retirement success.

Step 2: Understand Where You Stand & How Reachable Your Current Goals Are - Statistics and psychological research have proven that vague goals, such as, "I want to retire comfortably when I am 65" are doomed to fail, unless more specific goals are coupled with them. Again, with investing and financial planning, half the battle is fully understanding all the variables involved in your unique financial situation. Often, individuals don't fully examine their retirement goals or assess how they are working so far simply out of fear of what they will find. Pushing past this mentality and having a solid plan for your future is well worth facing your fears. Isn't it better to find out now, while things can be corrected?

Step 3: Know What's Important - Often, we get tossed around by the news, the current Dow Jones Averages, predictions surrounding the recession, and other factors that are subject to change. Don't try to plan your financial goals or retirement success around circumstances that are subject to change. Instead, focus on savings, staying out of debt, maintain your insurance, and keep your estate planning in order. While it is true that you can't control the economy or fluctuations in the market, you can control how prepared you are to face these challenges.

Step 4: Assess and Reassess - The investment strategy you followed when you were in your 40's should not be the same one you are following in your 50's. Just as you would check the soundness of your home after a major storm and make plans for a new roof after a certain length of time, you must also keep up with the way you are seeing your investments. Make it a habit to meet with your financial advisor for periodic reviews. Age, changes in health, changes in assets, the economy or family crisis all have an impact on the way you look at your investments and your retirement plan. Review often and plan accordingly.

There is no time like the present to sit down with a qualified financial advisor and take a look an honest look at your financial future. We've said it before and we will say it again...Your future does not have to be uncertain.

Whether you are brand new to retirement planning or a seasoned investor, we'd love to hear from you. We are here to answer your questions and put you on the path to success.

More simple, step-by-step keys to financial success can be found by grabbing your free copy of 6 Pitfalls of Retirement Planning.