Key Takeaways
- Personal financial planning is the first step towards realizing financial freedom.
- There are a number of things you can do now to improve your future financial situation.
- Today’s greatest personal financial planning tools are easy to use and capable of helping people radically improve their future.
Personal financial planning is rarely glorified on the same level as profiting in any shape or form. In today’s landscape, more people are interested in making money than actually managing the money they currently have. That said, the two concepts are not mutually exclusive. In fact, personal financial planning and wealth building aren’t two separate strategies, but rather one and the same. It’s no coincidence that those with a sound financial plan tend to demonstrate an increased propensity towards building wealth. Therefore, if you hope to realize financial freedom one day, the steps you take towards personal financial planning today will play an integral role in your future.
What Is Personal Finance?
Personal finances are the act of a single person managing their own money. Consequently, managing one’s personal finances is typically more involved than the day-to-day budgeting we have all grown familiar with. Proper financial planning will simultaneously seek to budget current expenses while maximizing the effectiveness of the money on hand. In doing so, it accounts for budgeting, banking, insurance, mortgages, investments, retirement planning, tax planning, estate planning, and everything else that could impact someone’s financial position.
[ Thinking about investing in real estate? Register to attend a FREE online real estate class and learn how to get started investing in real estate. ]
Why Is Personal Financial Planning Important?
Personal financial planning is important for anyone looking to gain control of their financial situation. However, everything is dependent on one’s personal income, expenses, living requirements and individual goals—and formulating a plan to fulfill those needs. Therein lies the importance of financial planning: it serves as the foundation for fulfilling one’s financial needs. In addition to that, it serves as the path of least resistance towards financial freedom.
Personal financial planning has more to do with one’s own personal goals than a universal standard. The individual’s financial position is relative to their own success, meaning personal financial planning is going to be different for everyone. Whether it’s planning for the future or budgeting for the upcoming mortgage payment, financial planning can take many forms.
Personal Finance Tips To Implement Today
While personal financial planning is relatively involved and typically takes place over the course of a long period of time, there are some things you can do today to get the ball rolling. Here’s a list of personal finance tips you can implement today to prepare yourself for a better financial future:
- Take Your First Step Towards Financial Independence: Personal financial planning should be implemented with the intent of realizing financial independence. Financial independence suggests someone is no longer dependent on income generated from any type of job or activity that would have them trade their own time for money. That said, few things can help a person realize financial independence faster than real estate investing. Start building on your real estate education, and perhaps it may play an important role in your financial planning for the future.
- Get Rid Of Unnecessary Expenses: Subscribing to the 50/30/20 budgeting principle will give you a good idea of where your money should be going. Allocate 50% of your take-home pay towards living essentials, 30% to lifestyle expenses (dining out, shopping, et.c), and 20% into savings.
- Write Down Your Goals: This tip helps two-fold. For starters, people are more likely to attain their goals if they write them down. There’s something about the visual representation of your goals on a sheet of paper that makes them more tangible. Secondly, identifying your goals will give you a better idea of what it is you are working towards. Having goals will put you on a clear path, and even help you when you veer off course.
- List & Categorize Your Debts: One of the quickest and easiest things you can do to get a better idea of your own personal finances is to list and categorize your current debts. Literally sit down and type out a list of each debt, how much it is, and its interest rate. With a tangible list in hand, it’s easier to formulate a plan of attack to pay down your debt. Start by identifying the debts that carry the most interest and prioritize them ahead of those that have less. That way, you’ll rid yourself of larger debts and avoid incurring more interest each month.
- Do Not Pay The Minimum: The minimum payments most debts require will make it nearly impossible to get out of debt anytime soon. It is always in your best interest to pay more than each payment requires. Paying the minimum will oftentimes barely outpace the rate interest is accruing.
- Automate A Savings Account: Instead of simply making “manual” deposits when you can afford to, set up an automatic deposit plan. Regardless of how much you plan to save (or how little), make sure the deposits are automatic. That way, you won’t be tempted to interfere with your savings schedule.
- Set Up Alerts: Most debts will enable borrowers to set up alerts for when payments are either coming up or due. As someone looking to get a hold of their own finances, it’s a good idea to take advantage of these simple tools. While they may seem trivial, they can help avoid late payments. Take five minutes to set up alerts across all of your debts, and you will be less likely to miss your next payment. Remember, every little bit helps.
- Get Ahead Of Tax Season: For better or for worse, tax season is an integral component to everyone’s personal finances. Ensure you are ready to benefit from tax season, start organizing your tax information immediately. File receipts from charitable gifts, Goodwill donations and additional income in a safe place. That way you can find everything you need when it comes time to file.
- Increase Retirement Contributions: Personal financial planning isn’t relegated to the present, but should also account for the future. Therefore, those who want to improve their financial position should also consider contributing to a retirement account. Individual retirement accounts (IRAs), 401(k)s, and similar wealth-building vehicles not only serve as a forced savings plan, but they also benefit from compound interest. What’s more, some employers match contributions to a 401(k), which essentially results in free money for those that contribute.
- Check Your Credit Report: Take a look at your credit report and check for any inconsistencies. Blemishes on a credit report can cost you in the long run, so be sure to catch them as early as possible. In the event you come across any inconsistencies, reach out to the credit bureaus to confirm the error. You’ll want to start improving your credit as soon as possible. Better credit scores lead to better loan terms, which can ultimately save you money on larger purchases.
The Best Personal Financial Planning Software
Personal financial planning may be as complicated or as simple as you want to make it. Again, the process of planning your finances is relative to your own goals. That said, there are some personal financing tools to make things a little easier. Below you’ll find a list of today’s most popular personal financial planning software:
- Mint: Mint is currently one of the most popular budgeting and expense tracking applications available on mobile devices. Popularized by its ease of use and accessibility, Mint is growing in popularity each day. Mint can read your own personal banking information and identify ways to save money. In order to hold you more accountable, the application also allows its users to set up notifications for important dates and metrics. For example, the app. will notify its users when accounts are running low or payments are due. The features are designed to keep people on top of their expenses in a manageable way.
- TurboTax: While most people only think about taxes once a year, TurboTax makes sure they are ready when the time comes. While priced slightly higher than most of its competitors, TurboTax is worth the investment, as the software is incredibly consumer friendly and accurate. What’s more, TurboTax allows you to file your taxes from the comforts of your own home, and without the need to visit an overpriced tax consultant.
- FutureAdvisor: Owned by the global investment management corporation BlackRock, FutureAdvisor is perfectly equipped to help investors meet their goals sooner than originally anticipated. Their proprietary software links directly to your personal investing accounts, so each of their recommendations match your holdings. As its name suggests, FutureAdvisor is typically used for retirement planning, which is great for anyone looking to gain an understanding of their current and future holdings.
- Personal Capital: Personal Capital is a wealth-management application that was specifically designed to help people manage their finances across several accounts. More specifically, however, this simple phone application links all of your accounts for free, as to give you a clear, real-time view of your personal finances. That said, Personal Capital doesn’t merely show you your bank accounts; it offers its users financial tools to translate their spending habits into a plan for the future.
- Tiller: A Tiller subscription offers financially-minded individuals the opportunity to forego tedious and time consuming data entry. In providing such a service, Tiller automatically updates your favorite spreadsheet applications (Google Sheets, Excel and many more) each day with the budgeting metrics that matter the most: Credit cards, investments, brokerages, loans, rewards, and other accounts deemed necessary for financial management. This service connects your personal spreadsheets to 18,000 financial sources, and acts as an automatic feed that gives its users the most updated and accurate information on their current financial standing.
Summary
Personal financial planning isn’t something most people look forward to, but it is nonetheless an integral component towards realizing one’s own financial goals. With a proper plan in place, it is entirely possible to get your finances in order today, and for the rest of your life. Perhaps even more importantly, it only takes a few small steps to get started. The steps you take today can help you get you closer to achieving financial freedom one day.
Have you wanted to gain control of your own finances, but otherwise struggled with where to start? Let us know if any of these tips help you get started on the path to financial freedom in the comments below:
