Good Financial Planning

Good financial planning doesn't come naturally to many people. The consequences of ignoring a bad financial situation, however, can severely affect your quality of life in the future. Living paycheck to paycheck, treating credit cards like cash, or relying too heavily on speculation over safe, smart investments are all dangerous traps that can rob you of your golden years and leave you in a tight spot in the face of a catastrophe. If you routinely turn to plastic, put more than you can afford in stocks or consider the entire available balance in your checking account "available to spend," you can safely bet you're in need of good financial planning advice.

Seeking Good Financial Advice

Fortunately, financial planning experts work with all kinds of people, many of whom don't know an APR from an IRA. With expert help available in most towns, there's no reason to plan your finances alone. An experienced financial advisor can help you understand sensible planning, savings and investment options before determining low-risk strategies that work best with your lifestyle and goals. Once you gain confidence in your knowledge of personal finance, you'll be well on your way to forming good spending and saving habits.

Creating a personal balance sheet is the first step to good financial planning. Start by listing all your sources of income, including your salary and any regular part-time work like watching your neighbor's kids a few evenings a week. Then list all your necessary expenses, including your rent or mortgage, groceries, car and health insurance, student loans and other debt. As vital as a night out with friends or a new outfit might seem to you, these don't belong on the necessary expense list.

Fortunately, good financial planning doesn't mean putting yourself on a financial fast. Even if you're trying to pay off credit card debt and don't have a penny in savings, leaving out life's little luxuries will only increase the likelihood that you'll relapse into habits of careless spending. After listing your necessary expenses, make a separate column for the expenditures that make life enjoyable, whether it's dinner with friends at a good restaurant or a rainy day fund toward a much-needed vacation. A good financial planning expert can help you strike a balance between planning for your future and enjoying the present.

Basics of Smart Savings

Once you have a good understanding of your necessary expenses and where you can budget for a little fun, you know what amount you have left for savings and investment. If you find yourself at zero, take another look at your unnecessary expenses to see where you can make an adjustment. You don't need hundreds of dollars to start planning for your future; even $25 a month can make a difference. The next step in good financial planning is to decide which strategies make the most sense for your lifestyle and long-term goals. Smart, consistent returns that carry little risk are often the best choices for beginning investors.

Think of the 50-50 rule as you start to save, mentally assigning half your money to retirement and half to emergencies. Most banks offer good savings accounts for your emergency fund, which will be more liquid, or readily available, than your retirement fund. For the retirement half you'll want to consider an account with a higher yield or better tax benefits, even if it's tougher to access before your golden years. Common retirement funds include 401k plans and IRAs, or individual retirement accounts. A good financial planning expert can help you understand how these accounts work and which ones are best for you.

Investment for Beginners

When you have saved more than $2,000 in your emergency account, you might consider making another split in this account, keeping half the money where it is and investing the other half in a more long-term account with higher interest rates. Common options include a CD or a municipal bond. Creating a new account for long-term goals is a good idea if you're trying to save for a down payment on a house or want to further your education.

The more you put into savings, the greater your options are for diversifying your portfolio, an important part of good financial planning. Seeking the advice of an expert can help you make the most of your savings without compromising your lifestyle. Planning for the future should make you feel confident and in control of your money, not stressed about where and how to invest it.

Good financial planning becomes easy when you have educated yourself on savings and investment and talked with a trusted expert to determine which low-risk investments are best for planning a comfortable lifestyle in your golden years. Through the help of a local advisor, financial planning might even become enjoyable.

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