A lot of us are intimidated by personal financial planning. We’re conditioned to believe that you have to be super smart and crazy well educated in order to manage your own money, but the truth is that anyone can learn to handle their finances successfully. And everyone should. Because no one’s gonna care about our money as much as we do, right? And when do you think is the best time to start with your personal and family’s financial planning? It’s NOW.
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(Even if you’re not a math whiz, don’t have a ton of extra cash, and busy juggling life & kids. )
Here are five keys to personal financial planning.
1. Know your net worth
Your net worth is your assets minus your liabilities. Simply put, it’s what you own minus what you owe. Your assets are things you own that have monetary value, like your home, your investments, and the cash in your bank accounts. Liabilities, on the other hand, are debts, such as student loans, credit card debt, and bills
Some things can be both an asset and a liability. If you own a home, for example, the equity that you have in it is an asset, while the amount you still owe on your mortgage is a liability.
Your net worth is like a black and white snapshot of your financial health. You might think you’re doing well financially because you’re making a lot of money, but if you’re racking up credit card debt or simply not saving enough, your net worth might be lower than you realize, or even negative.
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2- Know how you’re doing financially
Just like the stock market, your net worth will fluctuate, but the trend over time should be upward. Pay attention to how much you make, how much you spend, and how much you owe, with the goal of increasing your assets and decreasing your liabilities year by year.
I know it can be tempting to leave this in the hands of your spouse or your accountant or whomever, but at the end of the day, you’re the one who will have to live with the decisions that are made about your money. No one is ever going to be as invested in your finances as you are, so it pays to pay attention.
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3- Know Your Goals Of Personal Financial Planning
We all say we’d like more money, but often we don’t really think about why we want that money, let alone how much we actually need.
Spend some time really thinking about your long term and short term goals. A vacation? A new car? College savings for your kids? Retirement savings for you and your spouse?
Once you know what you want, you can start getting specific. Which goals are most important? How much will that car or vacation or retirement cost? How much do you have to save each month to make it happen? How long will it take?
How To Start, Manage, & GROW Your Online Investment Portfolio
(Even if you’re not a math whiz, don’t have a ton of extra cash, and busy juggling life & kids. )
When you know how much you really need, you can start making those goals a reality. This isn’t always easy. You might need to cut back on spending or postpone getting something you want to make sure that you’re staying on track. Think of it like exercise: short-term pain for long-term gain. What you give up now will allow you to lead a fuller, healthier financial life later.
4- Know where to get help with personal financial planning
Like I said earlier, you’re responsible for your financial well-being, but that doesn’t mean you can’t get help. Financial planners, accountants, and mentors can all give you personalized feedback and advice, while books and courses can help you understand financial planning and how to implement it in your own life. This kind of support can keep you on track and get your to your goals faster.
Ultimately, you want to empower yourself to be your own financial expert because no one is ever going to understand your unique situation as well as you do. But there will always be opportunities out there for you to learn more, so take advantage of them!
5- Know that you can sleep soundly
I’ve said this before and I’ll say it again: wealth isn’t just about how much money you have; it’s about how much you’re able to enjoy your life.
When you understand your finances and take steps toward achieving your goals, you’re putting yourself in the driver’s seat. That might be scary at first, but as you learn more, it’s going to get easier, and it’s going to get fun. You’ll start to feel empowered, and you’ll sleep better at night knowing that your money is working for you.
Where will you start your personal financial planning?
Now it’s your turn. Where are you in the financial planning process? Do you know your net worth? Have you started moving toward your goals? Leave a comment below and let me know!
I talk a ton about personal financial planning in the Invest Diva PowerCourse. If you haven’t already, what are you waiting for!! Go right now and secure your spot for my free webinar, 3 Secrets to Make Your Money Work For You, to learn how I started investing and grew our family’s wealth, and how you can too.
Remember: Invest Divas know their worth–their net worth, that is.
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#1 Best Selling Author. Helping you accelerate your retirement with Triple Compounding™ Former engineer on a mission to help 1 million households take control of their finances. Founder & CEO of Invest Diva.
