Financial Planning - Get the Big View of Your Finances

Many people are adept at handling their daily finances. Paid the bills? Check. Shopped for the best deal on that new TV? Check.

But what happens with the bigger picture? If you've ever had a nagging feeling your money could be working harder and smarter, consider doing some financial planning.

The process is like taking a hike up a nearby mountain to get the big view. It will take some time and a little effort. But, with the landscape laid out in front of you, it can be easier to find the best road to any destination. Plus, you may see intriguing new areas to explore.

How does it work? Financial planning starts with taking a holistic look at short and longer-term goals. Next, it's followed by making a financial plan to reach those goals. Make your dollars match your values, and meet your overall needs. You may be surprised to find larger strategies you've overlooked.

There are times when it's best to seek professional advice, but there is much you can do yourself. First, we'll explore steps you can take. Then we'll find out when it's smart to hire a pro.

"Do-it-yourself" financial planning

Here are some planning actions you can take.

-Think about short and long-term goals. What are your dreams? Do you want to buy a home, get a college degree, or travel the world? Maybe you long to retire early. Start a notebook or online diary to record your goals.

-Take inventory of where you are now. How much savings do you have? How much are you earning and spending? What are your personal assets and debts? Record your expenses for at least 3 months to really get an idea of where your money is going. You can use resources like Mint.com, Kiplinger's budget form, or programs like Quicken.

-Go over your basic needs, including risk management. Make sure you have the right kinds of insurance for health, home and possessions. If you have dependents, or own things, make sure you have a will or trust so you get to say what happens after you're gone.

-Pick a goal and create an action plan. Let's say you want to buy a home, but don't have the savings. It's suggested that monthly payments and other housing expenses don't exceed 30% of your average income. Work with this figure to see what you can afford, and what you'll need to save for a down payment. Go to Bankrate.com for calculators that will tell you how long it'll take.

-Review and revisit your goals and progress every month.

When to hire a professional planner--If you were organizing a large wedding or event, hiring a caterer would be smart. And most of us would head to a medical professional for health problems we did not understand. Likewise, consider hiring a competent financial planner if you find yourself in any of the following situations.

-If the sums are large, consider additional help. Did you get a life insurance payment, or inherit Aunt Susan's estate? If you're fortunate enough to have received a windfall or inheritance, you're a good candidate for help.

-If your finances are complex or disturbing you, get assistance. Are you headed for bankruptcy or juggling too much debt? Not sure whether you'll meet retirement goals?

-If you've had a recent divorce or loss of spouse,consider help. This is a time when people feel fragile, and may not be at their best to make informed decisions. Ask a trusted professional what your options are, and then take some time to reflect before acting.

-If you're unable to move forward or make decisions about your money,seek help. This might be just the step you need to get your finances in order.

You What Make a Good Budget?

Top Ten Features of a Successful Budget

What makes a good budget? In all the budget bloopers and blunders I've seen, the same few problems keep rearing their ugly heads. To avoid them, here are the top ten most important features of a successful budget.

1.Categories that fit your personal situation and your spending habits, not somebody else's.

2.Accurate income projections.

3.Enough categories to give you a meaningful picture of where your money goes and where you might be able to cut costs, but not so much detail that tracking is a chore that you'll soon tire of.

4.Inclusion of expenses that don't occur on a monthly basis, such as auto maintenance, homeowners insurance, personal property taxes, service contracts, etc.

5.Regular review of categories to determine if you need more or fewer, review of expenses, and brainstorming about ways to trim costs in each category.

6.Cash expenditure tracking and recording. Cash spending is the biggest leak in most budgets. Cash disappears quickly and if you don't write down everything you spend it on, you'll have a distorted look at your spending.

7.A line item for savings so you treat a contribution to your savings account just as you would a bill you owe.

8.Realistic written goals. Budgeting isn't about tracking your costs, it's about setting financial goals (saving for a downpayment on a house, buying a new car, getting out of debt, saving for retirement, putting your kids through college, traveling, etc.) and finding ways to meet them. Without goals, your budget is just a pair of handcuffs.

9.Identification of spending patterns you may not have been aware of when you weren't tracking your spending.

10.Most importantly, internal motivation and a positive attitude!