Managing Your Finances
Managing your Finances:
I've said it before, and I will say it again: Personal Finance is an ongoing journey. At its core, money management is about making smart decisions with your finances to achieve your goals. Often times, the smaller actions lead to significant outcomes.
That said, the financial world can seem complicated and intimidating. Financial professionals with throw around plenty of financial jargon, acronyms, and terms that are not a part of “everyday language.”
I am here to close the gap.
First of all, “financial success” isn’t about having all the knowledge to hit the jackpot or make savvy investments – it’s about daily habits, the consistent choices and the incremental progress that can accumulate over time.
On top of that, the real question to ask yourself is: What does financial success look like to you?
Think about that for a while: What is the purpose of your wealth? Not what defines you, not how others will define you.
Regardless, if you are worried that you don’t understand everything about finance all at once, then rest assured – you don’t have to – It’s a journey. But, it is smart to learn.
In this post, we will explore what it means to manage your money, a few ideas on how to make your financial situation more efficient, and leave you more informed of how the market works and what your options are!
Effective money management is the key to reaching the financial future that you plan for. It encompasses budgeting, saving, and investing. Where your money is, how it got there, and what it’s doing for you. So how does all this fit together?
While it may seem intimidating at first, there are 3 areas of Money Management that you need to understand to make managing your finances much more approachable:
- Budgeting: The Foundation to Financial Health
- Allocate your funds to essential expenses, savings, and discretionary spending.
- Review and adjust your budget to stay on track.
Budgeting is the way to make sure you are putting away enough money to meet your goals. According to a survey by the National Foundation for Credit Counseling, only 41% of American adults follow a budget. So, if you are not budgeting, you should be. This is Step #1 when it comes to building your wealth. Check out these 2 recent blog posts on this topic:
- Saving: There are 2 Types of Savings – Short Term and Long Term
- Short-Term Savings can be anything from your “High Yield Savings Account” for some larger purchases to an Emergency Fund that covers unexpected expenses or financial setbacks.
DO NOT IGNORE YOUR EMERGENCY FUND – Please
- Long Term Savings are established to earmark money for larger expenses like buying a house, a fishing boat (yes, this is my dream), maybe a new car, or for major financial goals such as retirement and children.
The Employee Benefit Research Institute reports that only 42% of American workers have calculated how much they need to save for retirement. Don’t be one of them.
- Knowing why you are saving and how much you need to save will make a big difference! And, it applies to the first point – budgeting.
See, it’s all connected!
- Investing: How Your Money Works for You
- Growing your wealth is usually where a lot of the confusion culminates. Both types of “Savings” can be considered investments but where they differ is how they are invested.
- Understanding the different options available (Stocks, Bonds, Mutual Funds, ETFs) can be a great place to start your investing journey because it will give you an idea of how to allocate your funds.
- Investing does involve risk, so you need to know what you are investing in and what your exposure is to this risk.
- Stocks: Buying In
- Stocks represent equity ownership in a company.
- Stocks can be purchased on exchanges like the New York Stock Exchange (NYSE) or Nasdaq and can be held in an investment account at a firm like Raymond James!
- Stock prices fluctuate based on factors like company performance, economic conditions, and investor sentiment (how people generally feel about the company).
- Bonds: Putting your money to work for others
- Bonds are a way for you, as the investor, to lend your money to state or federal governments, or to corporations.
- In return, they promise to give you periodic payments of interest, and your money back at maturity.
- Bonds will have different rates depending on how much the money is needed, and the rate at which they can borrow money from other sources.
- Mutual Funds: Pooling Resources & Diversification
- Buying a mutual fund is pooling your money with other investors into one place. A mutual fund company may have different funds that you can purchase for different objectives.
- The funds themselves are diversified into a portfolio of stocks, bonds, or other assets that are overseen by professional fund managers who make the investment decisions and aim to achieve the fund's investment objectives.
There are many more investment choices available to you, but these are the basics. Financial Advisors help you determine what kinds of investments work best for your preferences and goals.
Keep in mind: Building a portfolio can take time and effort. Starting small and building on top of what you have is a great way to manage your investments. Don’t feel like you have to rush in all at once!
Developing your method of managing your finances and understanding the intricacies of the market are great steps to take towards financial peace. By focusing on the basics, and taking small steps to set goals, develop your plan, and invest in yourself, you can build a solid foundation for long-term financial success.
By embracing the principles we've discussed—from budgeting basics to understanding the nuances of the markets — you are well on your way to a brighter financial future.
But the journey doesn't end here. Financial management is an ongoing process, requiring vigilance, adaptability, a willingness to evolve with changing circumstances. Remember, it’s the little things that can make a significant impact in achieving your aspirations. So, take charge of your finances. It will be worth it in the long run.
If you have questions or want to run an idea by me to learn more about your financial situation, don’t hesitate to reach out to me via email or phone. I would be happy to sit down and discuss the details with you!
All the Best,
Gil Brandon IV, AAMS™
