According to a recent survey by YouGov (commissioned by the Institute of Financial Planning), only 14% of people have put plans in place to work towards their financial goals (a drop from 19% last year). This is despite nearly 60% of respondents reporting that they are worried about their finances.Now, you may find that you are worried about your financial situation, especially after the recent spending at Christmas and in the sales, but the solution is not to put your head in the sand and hope that things will get better. Therefore, here are our 7 top tips for financial planning:
Don’t put this off Most people procrastinate over financial planning issues for a number of reasons: they don’t want to know the truth, they are worried about money, or they think it will be hard work. If you don’t start now, when will you start? Solution: set yourself some goals for your financial planning. They could be anything which is important to your life such as clearing Christmas debts, paying off the mortgage, saving for a holiday etc.
Understand your income and expenditure This is fundamental to your financial well-being. If you do not understand what is coming in and going out each month, the chances are that you are over spending. In time this could lead to debt and stress. Solution: Go through your bank statements and set budgets for your key areas of expenditure. Whatever makes sense to you.
Understand what’s in your financial pot Draw up a list of your financial assets, as well as your debts. This will help you to think about how far you need to go towards your financial plans. Solution: create a list of your assets and debts. This will help you to work on growing or reducing these items.
Build up an emergency fund Most people do not have enough in savings to cover them if something happens which means they need money urgently. You need to have at least 3-6 month’s worth of expenditure put aside in an instant access savings account. Solution: work out how much you have put aside in instant access accounts (not longer term savings or your current account). If you don’t have at least 3 months of expenditure put aside, then work on getting to this figure.
Think ‘what if’ No doubt you insure your car and your house contents, but what would happen if you or your partner dies, get sick, or loses their job? Think about the consequences in these situations. You need to build a plan for how you would cope financially if the worst happens, and this may include insurance. Solution: put together a schedule of insurance for these scenarios, and think about how much cover you might need on top.
Pay off those debts as quickly as you can afford When you become debt-free your finances will be in a much stronger position. think about all the added expenditure this creates, as well as the added cost of those items you purchased long ago. Solution: work towards paying off the most expensive debts by interest rate as quickly as you can afford. Put together a list of unsecured debts like credit cards and loans, and work on a budget to overpay until you can pay them off.
Put money aside for the future Start on this one if you can say you have done all of the above to some degree. It doesn’t matter if you start small, since it all adds up, and you can always increase your savings later.
Many financial pundits embrace grandiose theories and use mathematical formulas to convince the vast sea of American Investors to accept their vision of the perfect American Retirement Account Balance. They make statements like “by the time you are sixty five you should have X$ in your retirement portfolio to cover health care costs or to live the perfect dream of exotic travel and extravagant lifestyle of spend, spend and more spending. Retirement plans and accounts, however, are like “beauty” it is in the “Eye of the Beholder”! My perfect retirement lifestyle is not necessarily my cousin’s or for that matter my next door neighbor’s. We all have different interests, needs, and desires.Â But we all do share one thing in common we deal in a risky business indeed called Investing.It may not be a forgone conclusion; that Penny Stock Investors are investing for retirement. Some will develop an investment portfolio to hedge their current business needs whatever that may be. Some may invest just to prove to themselves and others that they can, while still others invest as a business to generate their monthly income in order to meet obligations. Still others invest for one goal, to build up a massive amount of cash these are typically referred to as “Day Traders.This article is not an attempt to convince anyone how to invest or why for that matter, it is simply to give another point of view for the motivation of investing. The need to think about retirement whether you are a full time investor or just starting out or you have been a “bi-vocational” investor for years.No matter your motivation allow me to make a case for you to invest with one eye looking down the road to retirement regardless of how long or short that may be. We all know instinctively that one day we will “give up”, “give out”, or “wear out”! Now I am not trying to be pessimistic or to be a bearer of bad news especially for those of you in your twenties and thirties. But what I am tying to impress on everyone is that just like in the market, life has no guarantees! By that I mean life and the market share the same propensity for change, volatility, risk, and dare I say fees, loads, and charges. Why do you think that the game of Monopoly is so popular? Because Monopoly like real life reflects the whole concept of “Time and Chance”.For those folks who are the always the winner at Monopoly remember this, life isn’t a board game and you cannot ever memorize all the cards that will be thrown at you. This is just like Investing! Multiple volatile conditions affect your investments 24/7 and there is nothing that can stop Time and Chance from happening to you or anyone else for that matter. Since we are all equipped with this basic knowledge wouldn’t it be prudent to at least look down the road and work up for yourself a basic vision of what kind of retirement you would like to have and at what age? Here are a few topics for your consideration.Living arrangements – Family residence, condo/town home, retirement village? How much will that cost based on today’s economy and then calculate from your current age to your perfect retirement age how many years that is multiplied by 3% for inflation. You will need to revisit this about every year to adjust for current inflation rates. Currently inflation isn’t really an issue but that wont always be the case.Health Care Costs- we don’t really know what these will be any more than we can actually count the stars in the night sky. This is true for most investors living in the U.S. now days. Since this is a High Risk area we need an alternative plan other than just cash accumulation. There are two key concepts you need to study “Mortality & Morbidity”. They will make you feel real happy! Not!Food – Now here is a topic that whole 2hr seminars have been based around. Many folks living today who are in the Boomer generation can remember when the cost of a loaf of bread was.75Cents and a cup of coffee at a restaurant was.25 cents. How about the incredible edible Egg? from 1985-1987 the price per dozen ranged from 42.9 cents to 51.5 cents.(Cooperative Extension University of California Number 85 June 30, 1988)Currently in 2012 one dozen large grade “A” eggs are selling for $1.7059 while the organic brown shell eggs in a carton range from $2.61- $3.16(http://www.ams.usda.gov/pymarketnews.htm or [email protected])Based on just these three areas of life we can deduce that living will be more expensive in the future than it is right now. And this is not taking into consideration the punitive tax system we are under in the United States currently or the new taxes that have and will be voted into existence before and during our retirement.What areas can we offset the risk with careful planning? Well for one, risk can be reduced by a well thought out investment plan focusing on an annual return that will beat inflation and keep up with the market while never delivering bad news like a negative return. I think that you would agree that these types of accounts would be the perfect holding area for your “Bread and Butter” retirement fund. What are these types of accounts? Well they are widely available in every city, state and the whole nation for that matter they are Indexed Annuities.The Indexed Annuity with safety and a guaranty income provision can provide income protection for you for life and while you wait to start the income the account can grow and compound the returns on the interest generated, and on the Taxes you would have paid if the money were in another type of interest bearing account. And never give you a negative return.Some investors work from a forward looking strategy and determine what there Social Security income will be when they reach either their max retirement age or when they can take it the earliest and begin to accumulate that much cash reserves or purchase an annuity with that much money and let that keep up with inflation. Then go along there happy way being the raging stock investor they are on the inside.Now couple this with a disciplined Investment Strategy and you have a retirement focused plan where you can have the peace of mind that your retirement funds will always be safe and growing, while at the same time focus on the business at hand that of being the best penny stock investor you can be.All the Best & Happy Investing!Randall Coxwww.PennyStockSuccessTips.comP.S. In my next article entitled “Create an Investment “Safety Net” with Old Fashioned Insurance”. I am going to reveal little known tips and strategies that most married couples have not considered. These concepts will help married couples who have one investor minded partner and another who is so frightened about risking their financial future that they wont even dole out a quarter in a payphone for fear of losing it.And the secrets that affluent people have used in order to get their hands on tax free cash to invest and buy businesses.
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