Finding Inspiration in Your Personal Finances

Finding inspiration in your personal finances these days might seem like searching for a needle in a haystack. You can read all the articles you want to about what others do to motivate and inspire themselves when it comes to money management, but really, it all comes down to finding what truly works for you. Without that proper motivation, you might just feel like there's no reason to start saving in the first place.

If lack of willpower or just lack of interest is what's currently holding you back from getting a firm grip on your personal finances, here are a few tips that might help you take that first step toward organizing your finances.

Goals

Setting goals can be a great way to motivate yourself to rein in your spending and begin organizing your personal finances. Whether they are big or small, short term or long term, goals can act as guides to assist you in building or modifying your personal financial situation. Goals can be as small as building a $500 emergency fund in the next several months or as large as creating a million dollar retirement portfolio.

One of the most important things to remember when it comes to goals however, is that goals often work much better when they mean something to you and are achievable. This is why it is important to realize that when reading articles regarding personal finance, you might want to take what the author has to say with a grain of salt. Since each of us has his or her unique financial situation, goals and their associated effects can vary widely. A $500 emergency to one person might seem like a lot, while that same amount to another might be insignificant and provide little or no inspiration.

Financial Planning

Setting goals to achieve with your personal finances is one thing, but actually planning out routes to reach those goals is another. It's easy to say that you want to build a million dollar retirement fund, but how exactly do you plan to do that? It's much the same, although on a much smaller scale, with building a $500 emergency fund. Goals without plans are like cars without gas -- they may be pretty to look at but probably won't do you much good in getting where you need to go. To build that emergency fund, are you going to stick $20 bucks a week into a jar on your dresser, pull $100 from your paycheck for the next two months or are you going to yank the band-aid off all at once and just stick $500 bucks in your savings account? Having a plan can make your financial goals easier to achieve and with attainable goals often comes the inspiration to fulfill your personal financial dreams.

Step-by-step

Still, even by setting goals and with steady preparation and planning, it might take some time to ease into organizing your personal finances. You likely won't want to step headlong into the fray without some careful consideration. Jumping the gun could leave you disoriented, unmotivated, and unwilling to continue working toward your goals. Easing into the re-organization or creation of your personal finances can make the transition easier and more successful. While you may be excited to get started working toward your financial goals, moving too quickly can lead to missed details, lack of planning, poor investment or savings choices, and frustration when you find you aren't moving as quickly or successfully as you had hoped. As the saying goes, "You must learn to walk before you learn to run".

Finding That 'Warm and Fuzzy' Feeling

Finally, it is important that when looking for inspiration within your personal finances that you find aspects of your money and investment strategy that appeal to you and make you feel good about your financial decisions. Whether investments vehicles such as savings accounts and savings bonds make you feel safe and secure or the stock market provides a sense of excitement and intrigue, finding inspiration in your personal finances often hinges on finding enjoyment in and being comfortable with the investment decisions you make.

Disclaimer:

The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. For financial advice, readers should consult a licensed financial advisor. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.

Using Financial Planning to Reach Retirement Goals

Today's economy requires careful financial planning in order to achieve retirement goals. The weakened economy and increased cost of living has left most people with less money to contribute for their future. However, strategies exist to help Americans build personal wealth and save for their golden years.

Many misconceptions surround financial planning. People often believe creating a financial plan is reserved for the wealthy. Others believe they do not have sufficient income to save for the future. Some believe financial planning is too difficult and requires the services of a professional financial planner. These false beliefs prevent people from reaching their financial goals and oftentimes leave them living paycheck to paycheck.

The truth of the matter is financial planning is available to anyone, regardless of income. With determination and a commitment to trim expenses, most people can save at least $50 per month. Over the course of time, minimal savings can add up to a substantial nest egg.

Several options exist to help individuals engage in financial planning. A good place to start is opening a high yield savings account. Another is to purchase a few stocks and bonds or mutual funds. As savings grow, many people turn to real estate investing and buy houses for use as rental properties.
Individuals living on a tight budget should take time to review expenses and determine where to cut costs. Financial expert, Suze Orman, recommends paying yourself first. This is the opposite of what most people are taught, but if you want to get ahead in life you must learn how to effectively budget money and set aside funds for the future.

Most Americans have more money than they realize, but waste it purchasing items they don't need. One of the most effective ways to determine how much money is being wasted is to track expenses daily for a month. Most people are astounded to discover how quickly little items such as morning lattes and fast food lunches eat up their household budget. The average American can easily save $100 per month by budgeting finances and avoiding impulse buys.

One of the most trusted sources for obtaining accurate budgeting information and financial planning tools is Dave Ramsey. Ramsey is known for his no-nonsense approach to overcoming debt and achieving financial freedom regardless of income. His infamous Gazelle Budget™ Lite online budgeting software helps consumers develop a financial plan based on a zero-budget.
Ramsey's website provides visitors with a wealth of financial planning articles, budgeting forms, personal finance and money management books, investing guides, financial classes, and personal wealth coaching from Ramsey's Financial Peace University. Visitors can participate in Ramsey's community forum at DaveRamsey.com to learn and share financial planning strategies.
Another good source for learning financial strategies is certified financial planners. These professionals can help individuals achieve long- and short-term investment goals. They are trained to help consumers recognize destructive spending habits and learn how to implement strategies to get out of debt through the development of solid financial plans.

One of the best places to locate professional financial planners is through the Financial Planning Association website at FPAforFinancialPlanning.org. FPA provides a variety of financial tools to help educate consumers about retirement planning, estate planning probate, saving for college education and buying a home.

It is never too early or too late to begin financial planning. In fact, the sooner you start, the easier it is to build wealth. Begin your wealth-building journey by taking time to conduct research and determine which type of investments will help you reach your goals. Then, create an action plan and make a commitment to stick to it!

Financial Security = Budgeting + Financial Planning

Financial Security = Budgeting + Financial Planning

We all want financial security. We all want to make enough money to support our lifestyles, raise and educate our children, save for a wonderful retirement, and have fun along the way.
So to achieve it all, what will help you more - having a financial plan or a budget? The answer is both!

Let's Review

I am against financial planning when its sole purpose is to make a sale or to market a financial service. Fortunately not all financial planners and financial plans are about making sales (most are, but not all). In actual fact, a well-documented and thought-out financial plan is an essential element when working toward your financial security. And another important element is a complete and accurate budget plan.

Think of Yourself as a Corporation

One good way to view and approach the quest for financial security is to view your personal finances the same way as every corporation and organization does. When it comes to running a successful business two of the most important elements are the budget and financial plan.
A corporation does not view financial planning and budgeting as an "either / or" proposition. They have an annual budget that guides the day-to-day revenue and expense decisions while their financial plan dictates the corporation's future goals and offers guidance on long-term decisions.

Step 1: Just like a Corporation, Start with the Budget

Just like any successful corporation, you first need an accurate accounting of all your day-to-day revenues, expenses, assets and liabilities.

In financial terms, budgeting is a process whereby you keep track of your current income earned, the daily expenses you incur, the value of your assets and the amount of your debts and liabilities. It is a snapshot of your financial reality today.

Here are the two basic components for a complete budget plan:

• The Household Budget: This is where you identify and list all of your day-to-day expenses. Accuracy is critical. The old saying "Garbage in, Garbage out!" applies. Don't just guess and estimate. Find a great budgeting software, spreadsheet, or calculator that is comprehensive and detailed. And don't settle for a budget that lists only the major items. Did you know that most of our reckless, wasteful spending is in the small items, the small details we subconsciously forget? (Like those daily Timmies or Starbucks pick-me-ups, yet another new hat or sweater in this season's shade of green, and don't forget those new shoes, and so on.) Your budget is critical to your eventual success, as it is the foundation for your corporation. Your budgeting goal should be the same as it is for any corporation. In corporate jargon that means maximize the value of every dollar allocated to an expense! Wasteful and errant spending should not be tolerated. (Translation: Get serious! Count every penny you waste on the big and little things … because it all adds up to you losing your bottom line!)
  

• Your net worth statement: A net worth statement (corporations call this their balance sheet!) is another basic component to a complete budget plan. It helps to track your progress in accumulating financial wealth (or not). It tracks the current value of your assets and the amount of your loans. Remember, there are only three ways to accumulate wealth: win the lottery, inherit it, or (as is the case for most of us) work hard, watch your spending and pay off your debts. Your net worth statement is a snapshot of your wealth. When the value of your savings and assets increase, so does your net worth. When you pay down your debts, your net worth increases. And if you spend your savings or borrow more money, your net worth declines. Again, accuracy is critical. Don't just guess and use estimates. (You're only fooling yourself!) Your net worth statement is like a report card that grades your budgeting activities. It tells you if you got an A+ or you need to "repeat."
  

Step 2: Financial Planning (Even Corporations Need to Dream)

Even for corporations the financial planning aspect of working towards financial security is the fun part. The financial plan establishes goals - financial success, financial wealth and financial security!
Just like a corporation, your financial planning should be built around your budget plan. Your budget tells you how much money you have leftover after paying all of your expenses. It tells you how much money you can add to your savings and how much money you have for paying down your debt.
Your financial plan should adopt a corporate approach, not a marketing approach. What do I mean by that? A corporation uses a financial plan with actual numbers as identified by the budget and net worth statements. (Can you imagine if corporations used guesses and mere estimates when coming up with a financial plan? (!*#$!) In other words, you have to do some real math. For example, if your net worth is $100,000 today and you can comfortably save $400.00 per month for the next 20 years, at a reasonable investment rate of return equal to 4.0%, compounded annually, your financial goal would be $362,047.00.

If this financial goal is inadequate, then just like a corporation, you will need to revisit your budget to see how you can increase your revenue, reduce your expenses, or alter your assets to enhance your ability to achieve a greater financial goal. It's a matter of very real numbers and simple math.

Then There's the Other Stuff: More Than Just Numbers

Finally, after working with all the real numbers, your financial plan should also consider all those things you can't control. It consider unknowable and uncontrollable events like births, illness, death, disability, property destruction, etc. Depending upon your personal circumstances, this aspect of your plan may be very simple or very complex. (This is another article just on its own!)

Remember: Your Dreams Must Be Firmly Planted in Reality!

Attaining financial security requires both an accurate budgeting plan and a comprehensive financial plan. Corporations have known this for decades and have recognized the need for both, and so should you. Having a budget without any idea where you are heading is about as useful as having a financial plan without a clue where your finances are today. (It's kind of like sitting in a rowboat with only one oar.)

So, if you really want to attain financial security, then start by defining where you are financially today by establishing a household budget and a net worth statement. Then establish and define realistic goals within a corporate-style financial plan.