Financial planning can be a tough thing to do especially if you do not have a stellar income. We all know that we need to save money for retirement, kids college tuition, for emergencies but we seem not to be serious about it. If you have no financial management skills meaning you probably are living a hand to mouth kind of life, then you need to listen to the advice of financial planners. Here are nine common tips a financial planner would tell you to do.
1- Know Your Expenses
The problem with most of the people is they do not have a clear picture of what they earn and the much they spend. If your expenses are too high vis-à-vis your income, you need to cut some of them and strike a balance. Financial planners often advise you make a list, create a budget and follow it to the latter. Often you will fall into the impromptu buying temptation; if something is not in your expenses list, then it is not important. You should adopt the 50/30/20 rule. Spend no more than 50% of your income on needs, 30% on wants and 20% on savings.
2- Avoid Debts
Debts have a way of stalling you down; if you have a lot of consumer debts, then you will not have the cash flow that is needed to save. Your goal should be to earn interest from your savings not paying interest rate to lending firms. You cannot grow financially if you maintain consumer debts.
3- Invest for the Long Term
Investment should be a marathon rather than a sprint. So start your own investment strategy and stick with it no matter the circumstances. Do not fall victim of pyramid schemes; get-rich-quick schemes or Ponzi schemes of some sort. When investing go for reputable investment firms where you be sure your money is safe.
4- Automate Your Savings
To avoid falling into the procrastination habit, you need to automate your savings plan. Your bank offers automatic deposits or standing orders. That way you will be sure that you will only be spending after you have saved. Also look into technology tools that will make your savings journey cheaper and enjoyable. There are tools which can calculate and determine for you how much you can afford to save without straining your budget.
5- Discuss Money Matters With Your Spouse
Money is an emotive issue, and often most partners keep financial secrets. If you want to have a healthy financial relationship with your partners you should be able to discuss with them about it. Set financial goals together, reflect on how you want your future to look like. Money is cited as one of the main reasons that lead to family breakages.
6- Review Your Insurance Covers
You need to regularly review the covers you have. The amounts coverage should always be consistent with your initial needs and intents. If you have a medical insurance cover, life insurance, car insurance or any form of insurance. Insurance covers will help you live a financially secure life. It would be unfortunate to realize that your cover limit is not enough to clear your medical bill when you are in the hospital.
7- Invest in Capital
Appreciation on capital you should know is never taxed. It, therefore, means you have control over what you receive if you decide to dispose of your capital. Land is one of the most secure capitals you can invest in. The rate of appreciation in land is high compared to other assets.
8- Use Flexible Spending Accounts
Often referred to as FSA they offer you’re a lot of advantages and you should maximize their use. Your employer, for instance, might offer you medical expenses and dependent care costs. The maximum contribution for these out of pocket healthcare FSA account is $2600 for principle and $5000 for dependents. You are able to save hundreds if not thousands of dollars a year in tax savings.
9- Reconsider your Pension
It is advisable to opt to take your pension in the form of an annuity as opposed to a lump sum payment. However, before you make the decision, you should compare both outcomes over your life expectancy. Your pension scheme provider might convince you that a lump sum is best, but until you have done your math, you can make an objective decision.