Financial Planning

May 31st, 2007

Plans are good to have, but too many people either don’t take the time to make a plan or make a plan and stop at that. You need to follow through. Our advice: JUST START!

3 Step Process

1. Reduce Monthly Bills

Go through and tally up all your monthly bills. After all the monthly bills are tallied up your next step is to select each bill and think about cutting the costs. Don’t be afraid to spend some time phoning companies looking for deals. You may be able to reduce your monthly bills by thousands of dollars! A dollar saved is a dollar earned.

Phone Bill: Phone a few companies that offer VOIP and see if you can get any savings. Unlimited long distance to some countries is included for one low monthly price. One company to check out is Vonage. Don’t be afraid to look up their competitors either.

Car Insurance: You may be paying more than you have to for car insurance. Phone around! It may take a few hours, but you could save hundreds, or even thousands a year by finding the right company for you.

Home Insurance: Next time your home insurance comes due, don’t just make the payment. Phone around! It could be worth a few hundred in savings.

Health Insurance: This is serious. You need good health coverage at an affordable price. Phone around and ask lots of questions. Don’t cut corners with this one.

Life Insurance: By now it should be abundantly clear to you a lot of money is going towards insurance of all sorts. It is ridiculous! If you don’t need insurance, don’t get any. You only need insurance if you have a spouse, dependents, or owe lots of money. If you don’t need insurance, then don’t worry about it. Besides, you’re not going to be around to see it anyways.

Television Cable: Do you honestly watch all your channels? Why do you pay for over 100 channels when you only watch 6 or 7? Phone your Cable Company (or satellite) and ask about other plans and packages. Phone competitors and see what they offer. No use paying for things you don’t need. If you only watch some of the local channels, then you might not need cable. You might be able to get by without it.

Internet: Phone the competitors. You want a good internet connection but at an affordable price.

Gas: Okay, so you’re wondering why this is on the list. Well, you need to know how much you’re spending a month on gas for your financial plan anyway. But you can probably see it’s more than you want to be spending. Now don’t start complaining about gas prices just yet. There are ways to reduce this. For short trips you can walk or take a bike. You don’t need to drive two blocks to the convenience store (I’m guilty too). You need some exercise anyway. Buy a small, more fuel efficient vehicle. Hybrid vehicles are an option as well. Look into it. If you’re spending too much on gas, there are ways to save some.

Car: Are you leasing? There can be times when leasing makes sense, but for most of us it doesn’t! Buy a cheaper used car. You can get some great deals on cars that are only 4 or 5 years old and still look great. You don’t need a vehicle worth 40 grand to drive to work when a vehicle worth 5-8 grand will do just fine and still look good.

Exercise Club Membership: I think living a healthy lifestyle is important. People that drive everywhere and try and park in the closest parking stall to the building don’t need a exercise club membership. Park farther away from the entrance to the mall. Walk a little. Take a bike or walk to the store. You might not need the club membership if you were getting the exercise in your daily life. Take the stairs instead of the elevator once in a while. I do think having an exercise club membership is good, so don’t go out and cancel it. Use it.

Groceries: Don’t buy your groceries at a convenience store or eat-out for every meal. You can save lots of money by going grocery shopping at the right places.

Interest Payments on Debt: Check out your interest rates on those credit cards. See about getting that debt written into your mortgage or reducing your credit card debt with a lower interest loan.

There are many more items that will crop up on your list. Think about ways you can save money. If you have a Home Business then put your phone bill in your business name. It’s a tax write-off. Think about how you can lower each bill to the lowest point possible. Then do it! Check out other tax write offs for home businesses.

2. Pay Off Your Debts

What is the point of paying 20% interest on your credit cards and investing money in the stock market? Unless you’re consistently getting 20% return or higher on your investments, the best investment you can make is to pay off those high interest loans/credit cards. After all your debt is paid off, then you can begin to think about saving.

3. Start Saving & Investing

There are many things you might want to save for. It could be a down payment on a house or investing for your retirement. The earlier you can begin the better. This is especially true when thinking about investing for retirement. Compound Interest is your best friend and time is your enemy. The more time you have the better. A 20 year old can easily be a multi-millionaire by retirement. It only requires some money management skills and putting money into investments consistently. It doesn’t take a rocket scientist! So start today.

Summary

You can’t cut all your expenses so don’t try. Be fair. Everyone needs some money for entertainment. Just don’t overdo it.

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