November 16th, 2008 — Goal, Personal Finance
One of the hardest things for many of us to do is to manage our finances properly. It can be hard if you’ve had no training and you’re used to just spending freely, whenever you want. There are thousands of people out there that can’t balance their checkbooks let alone plan for their future, but there is no shame in that. You just need to take that first step towards learning about how to start managing your finances and getting ready for the future.
For some, this may just not be possible, and again, there is no shame in that. If you simply cannot make sense of your money, you will need to get some help before you get into trouble. An accountant can really make a difference if you’re struggling and they usually do not cost that much money. You’ll actually be saving money in the long term and you’ll be able to spend less time worrying about your money.
But for most of us, it’s important to learn how to do this on our own. Unless you are incredibly bad at math, there is no reason that you cannot manage your finances. It’s really just basic addition and subtraction and anyone can do it. It takes a little bit of focus and you may need to learn a few terms along the way. However, you’re investing in your future when you learn how to manage your finances and it will pay off.
Let’s start off with basic financial planning. A lot of people hear that term and simply turn off. However, it’s actually pretty easy. Here’s an example - You need to ask yourself, how much money do I want to have saved five years from now. Now, divide that number by five. This is how much money you’re going to need to put aside every year to meet that goal.
If your goal isn’t reasonable, you may need to fine-tune it a little bit to bring it line with your income. Now, you’ll need to take that yearly figure and divide it by twelve. This is the amount you’ll need to put aside every single month. Set up an interest bearing savings account and make that deposit every single month. You may need to discipline yourself for the first few months, but it will get easier. If you find that your finances are a little tight, try revisiting a few of your expenses to free up some cash.
Lastly, it is important to understand how debt works. There is bad debt – which most of us are in, and then there is good debt. A simple formula to tell the difference is:
Bad debt = money spent on consumables and things that will never give you a return
Good debt = money spent on something that will create new income streams or pay off in the future.
By using good debt, you can reach your savings goals a lot faster and it won’t be so difficult.
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November 12th, 2008 — Diversification, Financial Security, Income Streams, Investing, Money, Personal Finance, accountant
The average person usually tries to struggle with their finances year after year and only visits an accountant a few days before their taxes are due. By this point, it’s up to the accountant to try to piece everything together and they won’t be able to offer much help when it comes to managing your money. The fact is, most of us could use the help of an accountant or a financial planner. The question is – do you NEED one?
Let’s take a look at a few scenarios that answer this question. Accountants and financial planners definitely serve a purpose but they may not be necessary if you already have a good grasp of solid financial techniques. But, before we go any further, let’s get to the scenarios.
Scenario #1 –
You’re just starting out on your own. By this point in your life, you’ve got a new job, a boat load of student loans and your whole life is years away, right? Wrong! If you don’t have a basic grasp of good financial practices, this is the worst time of your life to sit idly by. An accountant or a financial planner is incredibly helpful during this stage in your life and can start you on the path towards financial independence. If you have trouble balancing a checkbook let alone planning for the future, there really is no question – you need an accountant.
Scenario #2 –
You want to get into investing, but you’re really not sure how to get started. Many people make the mistake of hooking up with a broker that may not have their best interests in mind. You would be better served by visiting a financial planner or an accountant that specializes in handling investments to get an idea of where you need to start and where you want to end up in a few years. By taking the right step at this juncture in your life you can save yourself a lot of heartache and financial woes.
Scenario #3 –
You already have multiple streams of income coming in and you’re pretty much a whiz at finances. In this case, you may not need an accountant, since you’re already capable of handling most things. However, you may want to seek out a financial planner to determine whether or not you’re missing out on some opportunities that could increase your wealth further. If you have not yet diversified, this is a very important step to take. We still recommend using a certified accountant for tax preparation, even if you are a whiz at finances, simply because they have more experience in handling the complex US tax code.
Scenario #4 –
Finance???? I’m lucky to have money by the end of the month! If you’re just getting by, you may not be able to afford an accountant just yet, but you definitely need some help. Your best bet is to visit your local library and start reading everything you can about the art of managing your money. This will help you start out on the right path until you can afford to get an accountant to help you.
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