Wednesday, August 1, 2012

Getting Your Financial House in Order

Sometimes, I had the chance to do a financial wellness presentation to companies. Before the presentation, we would have a simple workshop and in most cases, the participants would share their own financial knowledge and experience on how to set aside funds for their future as well as list their issues on not being able to save.

Savings. Credits:
UNHHealth Health Services, University of New Hampshire
The most common statement that came out from the workshop is that no matter how hard one tries, it is hard to save money because of the cost of living, recurring payables and/or immediate needs/wants.

To help answer the issue on not being able to save, some basic laws from Beth Kobliner's "Personal Finance in Your Twenties and Thirties" can help prioritize the checklist on the financial plan.

  1. Get health insurance – A single medical problem could bankrupt you. Therefore, health insurance must become your highest priority. If your employer doesn’t offer it, get one for yourself. This is the first step in financial planning.
  2. Reduce your debt – The best way to start saving is to reduce your high-interest debt. Or better, write off your debt. The interest rates on some loans / credit cards are higher than the return you’d receive from investing the money.
  3. Start saving for retirement – The best time to start saving is when you’re young. Interest rates will really start working for you as you get older and accumulate principal.
  4. Reduce your banking costs – Most Saving accounts, Checking accounts, etc have maintaining balances. If you are not careful and go below the minimum balance, fees can take a big bite out of your bank balance.
  5. Build up a nest egg for emergencies – What would you do if you were suddenly laid off? Save enough to cover your living expenses for at least six months. Some banks have facility to automatically shift funds from your checking account into a savings or mutual fund account.
  6. Become an investor – Join a mutual fund pool to reduce your risk. Invest in mutual funds, which reduce your risk and keep you even with inflation.
  7. Reduce your taxes – Look for ways to lower your annual taxes. Sometimes there are discounts if you pay your taxes early.
Start paying attention to your finances today. Apply the 7 rules and develop the habits that will help you for the rest of your financial life.

Success happens here. Credits: