If you know you should be planning your financial future and safeguarding the assets you have, but you aren’t quite sure where to start, this is the article for you!
I am a highly qualified financial planner. Having worked with hundreds of clients to sort out their financial planning, I have seen many times over that, as with many things, taking the first step in the process of sorting out your personal finance is usually the hardest.
Once they get started, however, people thrive on the empowering feeling of taking control of personal finances. This includes making wise investment decisions to get the best from their assets, setting concrete financial goals, saving money and paving the way for a secure future for themselves and their families.
Taking control doesn’t magically happen – it will take some dedicated time on your part, but it is time well spent to have a comfortable financial life.
So, where do you start? Of course, the first task is to understand your current financial health. Then, it might be helpful to work through various questions and write all the information down in one place to provide some clarity.
What is Personal Finance?
Personal finance is all about people, not products. It deals with the many issues in people’s lives that are related to money. Personal finance can be defined as “the management of income and expenses to enable individuals to achieve their financial objectives.”
Everyone needs to embrace personal finance because it builds wealth by teaching you how to accumulate assets and money, manage debt and plan for the future, skills that will be useful throughout your life.
Financial Checklist – Understanding Your Current Financial Situation
♦ What is your average monthly expenditure?
Make a note of where your finances or money are spent and divide the costs into two categories, essentials (rent, food, utility bills, insurance) and non-essentials (meals out, leisure activities, non-essential clothing).
If you look at your monthly expenditure in detail, there are areas where you can trim it down and save some money. It is easy to forget about the small costs that add up over time, but it is just as important not to lose sight of them in a bid to save more money in the long run. A thorough understanding of your current financial health will help you make informed decisions in the future when it comes to planning your personal finance.
♦ What is your income?
If you have a monthly salary, this is pretty simple to do. However, you may have additional sources of revenue, such as rental income or dividend payments, so make sure you note everything down and build a complete picture of your annual cash flow.
♦ What debts do you have?
Make a list of these. Sensible credit such as a mortgage is ok, but high-interest debts such as credit and store cards need to go asap. It is also worth checking out your credit score and working out if you can do anything to improve it.
This allows you to have an overall picture of how much money you have available to spend. In addition, properly monitoring personal finances will give you the advantage of having enough money for things such as an emergency fund or unexpected expenses.
♦ What assets do you have?
Do you know what your assets are worth? It’s helpful to get up-to-date reports on any investments you have and current valuations of any properties you own to ascertain your global wealth.
Asset management is also crucial in getting your finances to make sure that you are getting the best possible returns on your hard-earned money.
♦ What are your financial goals?
It’s helpful to write down long-term goals so you can prioritise them and refer back to them when the chaos of life starts to crowd in and you begin to lose focus. Some of the major areas that most people should think about are retirement, education fee planning and significant purchases such as a property.
What is a Credit Report?
It is essential to understand what a credit report is – essentially, a credit report is a document that contains information about an individual’s past behaviour concerning financial transactions and their borrowing history.
A credit report provides insight into how reliable you have been when dealing with your creditors – which could potentially include banks or any other company or individual who has lent you money – as well as information on how good of a “credit risk” you are. A credit score will always be based on the information available in a credit report.
How do You Get Free of Credit Card Debt?
Personal finance is not just about how you manage your assets to get the most benefit. It also includes debt management and using your credit cards wisely. If you’re carrying too much debt, it can be hard to know where to start, but tackling credit card balances head-on can improve your cash flow in a significant way.
You can mitigate credit card debt by making larger payments instead of minimum payments to the accounts with the highest interest rates first. If your credit card debts are different interest rates, make sure you list them in order from highest to lowest interest rate. Then, put any extra money towards the first account on your list. Once that first one is paid off, take the amount you were paying every month and apply it to the next card on your list. Another consideration should be to avoid making late payments.
Why is Budgeting Personal Finances Important?
Most of us can appreciate how trying to run a business without a budget would be folly and makes it easier to owe money to loaning companies– how would you know if you had enough to pay your costs and staff each month?
But your household is not that different compared to a small business. To get the most out of your income and savings, which for most of us is limited, you need to budget and ensure that you have enough cash for savings. This money could be used for regular expenses and be saved or placed in investment accounts to achieve your goals, pay the taxman, and allow for one-off life events such as a wedding or unexpected bills.
Expatriates often have additional financial planning elements to consider, such as deciding where to retire, working out whether they will need to pay tax on overseas income and assessing whether moving countries could impact their pension and how much they can spend. Getting advice from a financial adviser is a critical step on how to get your finances sorted out.
Budgeting or putting your finances in order ensures that you are using the resources available, such as professional life insurance advice, in the best way possible to achieve your long-term life goals. They also aid you to avoid dealing with financial struggles somewhere down the road.
Potential Financial Planning Traps to Look Out For
- Inflation – dubbed the silent thief, inflation can play havoc with a financial plan as asset values and expenses change over time due to inflation, putting your savings account at risk.
- Interest – interest on savings must at least keep up with inflation, or your assets will be falling in value, but the idea is to maximise your return and build your wealth steadily over the long term. It is usually applied to an amount on a monthly or yearly basis.
- Risk – risk is a key and often overlooked factor when investing. Your risk tolerance changes over time, and your portfolio needs to adapt to stay in line with it to avoid potential money or financial issues.
- Exchange rates – these are such a huge consideration for expatriates. Fluctuating exchange rates can have a massive impact on your income, returns on the money you invest and living expenses, particularly if you are earning or have savings in one currency while your day-to-day expenses are in another.
Why Having a Professional Financial Adviser in Your Corner is a Good Idea
Financial planning can be daunting, time-consuming and stressful, but a professional financial adviser can solve all those issues with helpful tips. Their expertise will make producing a meaningful budget, setting financial goals and getting the best out of your investments a doddle.
Experts can help you keep your credit score up and keep you free of credit card debt. You’ll have the peace of mind of knowing that you have made the right decisions for personal circumstances to get your finances in order.
How Exactly Can a Financial Advisor Help You?
There are many benefits to working with an experienced financial adviser to sort out your financial obligations. They have years of knowledge that can help you get your finances in order and assist in keeping track of your savings. The following are also ways that an expert can help you build wealth and put you on the right path to having a proper budget:
- Working out your net worth and how best to protect it
- Establishing a budget and planning for significant expenses in the future
- Determining the best investment structures for your situation
- Maximising the return on your investments
- Planning in the event of a relocation or significant life change
- Protecting you and your family with life and health insurance coverage
- Gaining a general understanding of how to manage your finances
If you need some help getting any element of your financial planning in order, I would be delighted to assist. I have helped hundreds of expats in Asia take that crucial first step towards taking control of their finances and would love to do the same for you.
Please feel free to contact me for an initial consultation.
Senior Financial Consultant- Highly Commended Emerging Talent of The Year (International Investment Awards 2019)
I aim to maintain and grow an excellent relationship with each client which lasts throughout their working lives and beyond. I strongly believe that a good financial adviser can make a significant difference to an individual’s financial success and positively impact their lives, which is why I love doing what I do.