Doing Financial Planning during Tough Times
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The ideal thing to do in these tough times is to go back to fundamentals, which means reduce expenses to be able to set aside funds for savings and investments.
“Stick to a budget, evaluate spending patterns, postpone luxury purchases and reduce pointless frills,” advises one finance expert.
Differentiate between wants and needs. Needs apply to those that sustains you like foodstuff, home and clothes, while wants are things that you can live without.
Recording expenses
Document your expenses everyday. If you don’t document it, you won’t be able to keep track of your funds. Documenting expenses can also help you find out what you can reduce. For example, if you love Starbucks coffee, you can purchase its cup instead and put your own coffee in it. Or buy a pack of granules, which is less expensive than buying a cup of coffee every day.
Document your weekly expenses. Income less expenses equals savings. Put your savings in financial institutions, mutual funds, insurances and stocks. This would be typically around 9 to 33 percent of your income. From doing it on weekly basis, go to monthly then annual. If you can reduce your daily expenses, you should be able to reduce your annual expenses too.
For those who don’t like to keep records, try the envelope method which works for most people due to its simplicity. Assign a budget for foodstuffs, for instance, by putting it in an envelope.
Or you can charge purchases to your credit card so you have a record of your expenses. However, this is fine for those who can manage themselves when it comes to shopping. I suggest for those who can’t to use debit card. With budgeting, one should have an arrangement that is achievable. It’s easy to start a budget, but what’s more challenging is following it strictly.
Building a nest egg is necessary in good times and bad so you can have something to when the unforeseen events take place. Assign first how much you want to save because you want to attain a goal. Expenses can be reduced. Don’t touch your savings unless there’s an urgent situation to use it.
Correct supervision of finances
Imagine the fulfillment when you know you’re making the most of your financial position. That your investments are earning, your net worth is ever increasing and that you’re even receiving more from your everyday banking and cash flow.
Picture your peace of mind when you can gaze into the future and know your retirement years are protected. And that your loved ones are taken care of, whatever might occur to you.
Financial planning can make these things possible. If you have goals for your future, financial planning will help you realize them. If you don’t have goals, it will help you build them.
Financial planning helps you appreciate how each financial decision you make affects other areas of your finances. For example, buying a particular investment product might help you pay off your mortgage faster or it might delay your retirement significantly. By viewing each financial decision as part of a whole, you can consider its short- and long-term effects on your life goals.
But even if you already have a plan or goal, you can still change it, depending on the inflation rate and major events like marriage, death of a family member or getting an inheritance. One has to assess his plans annually.
It’s different strokes for different folks. Some plans may work for many, others may not. That’s why one needs a financial planner who will assess your risk aversion and stage of life you are in. You should invest long-term in stocks. But you have to be educated on this aspect.
Financial planner
A financial planner helps you determine how to achieve your life goals by checking at all your needs, including budgeting and saving, taxes, investments, insurance and retirement planning. Or the planner may work with you on a single financial issue but within the context of your overall situation.
If you are in debt, he or she can facilitate you get out of that financial mess by computing what you have or giving advice to pay that debt. But if your case is really bleak, declare bankruptcy .But even if you have a planner, it’s you who will put into practice your plan.
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3 Responses to “Doing Financial Planning during Tough Times”
budget planning is a very important issue, and not only in tough financial times. managing your finances can give you a better idea as to whether you can buy those jeans you wanted, or as you mentioned above, get your Starbucks coffee in the morning. theres a budgeting tool that can help you make the planning process easier.
By
Joel Carry (Who am I?) on Jul 16, 2008
Coffee is bad for your health. You should cut it out completely in my opinion, but I agree you should record expenses. Especially if you like to spend.
Just recording won’t cure everything though, you have to make sure that you are keeping a good tally. I recommend try searching through docstoc and see what excel sheets can be found there.
By
theWild1 (Who am I?) on Jul 17, 2008
@ Joel: Thanks for link, I’ll check that out.
@Wild1: You know what, I think you’re right*laughs*. 2 months ago I was told that I had a .07cm stone in my kidney which caused me some MAJOR pain. When the urologist asked me if I drink water and coffee, I told him I must be drinking coffee 4 times a day and 2 glasses of water a day. He did told me that I need to drink ATLEAST 12 glasses of water and to get rid of coffee because it tricks my body that my stomach is already full, hence avoiding water.
Well as of now, there’s really no way to avoid my caffeine shot, but at least now I’m drink once a day
thanks man!
ps: I passed out that .07cm stone using lemon juice-olive oil mixture. Better than burn my wallet via an operation!
By
moneyexpert (Who am I?) on Jul 18, 2008