Financial Planning

I’m going with some of the financial classics for reading right now. I just started Nice Girls Don’t Get Rich, and will probably be headed on to Rich Dad, poor Dad and that series next. They are from before the crash, but there will still be some applicable principles in there, I’m sure.

One of the things that Nice Girls asks you to do is set an actual, number goal. What is your financial goal? To maintain your rate of pay without having to work? To pay off your debts and have some set aside for retirement (how much?)? To have $4.5 million? All are good. It got me thinking. I wouldn’t mind being rich, but what would that look like for me? Do I need over a million dollars to be rich? I don’t know. It would certainly be nice! I’d feel secure that if anything happened we’d be taken care of.

So, to get there, what do you have to do? As I work my way through the book I will come up against some answers, but it seems to me that the first step is learning about money. How does it work? Who decided how much there will be? How does the Federal Reserve decide on interest rates (in the U.S.)? Learning the lingo of stocks and bonds and commodities would help. Taxes and their laws would be good, too. Figuring out how risk averse I am when it comes to money is essential for planning.

Once you have some of the information, I would say it’s time to start setting up a tentative plan. Mine includes becoming debt free, then beginning to invest. It doesn’t make sense to me to invest if I am just going to turn around and pay my dividends to the credit card company. I wouldn’t be getting the most out of my money.  I won’t be paying off my mortgage immediately, I want to get going on more retirement savings and some investments before I commit to the 15 years it will take to pay it off. While it’d be nice to wait, I’d be starting too late on the retirement savings.

I have about two more years to learn more about money before I get to the investing bit. I could go to websites, newspapers and magazines. Forbes and The Wall Street Journal might be good starting points for me. Staying debt free is essential to me. At this point I could go to a financial planner, broker, or accountant and start the actual plan. Get it laid out formally so that I have something to reference. Life always happens, so it needs to have some flexibility written into it. Be wary of things they might try to sell you, initially you’re there just for a plan. Before you invest in anything, make sure you know your stuff and the conditions of the investment. Go in knowing what you want and be very careful about letting yourself be talked into anything on the spot.

Ok, this is all basic stuff, I know. But it helps to have it spelled out sometimes. This is my version of a tentative plan. I may never get that million dollars, but I have a sensible starting point to build from. I know where I want to go and have a plan for the direction of my money for the next several years. That’s a good start.

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