Facing personal finance challenges

There are many tests you face when you’re in charge of your personal finances. For example, your emotions influence your decisions and many will steer you in the wrong direction. Greed and fear are the two strongest emotions and following either to excess has crashed many financial plans. Immediate gratification also lurks in the background singing the siren song of “buy now, buy now, why wait” to entice you to spend everything you earn and maybe a little more. Of course, if you spend everything you earn today, you won’t have anything saved for tomorrow.

Then there are the Wall Street marketing machines that are geared to help separate you from your money. If you read any consumer money magazine, listen to CNN or watch any of the Sunday infomercials, you’re bombarded by ads and “experts” with get rich quick schemes. None of which work, of course.

So what should you do if you want to make smart financial decisions so you can get on with your life? My prescription is pretty simple.

1. Have goals based on what’s important to you.
2. If you’re still in your earning years, spend less than you make. If you’re already in the time of your life in which you’re living on your savings, then spend an amount that will last your lifetime and not more.
3. If you’re in your earnings years, save as much as you can and start as soon as you can. A good rule of thumb is to save at least 10% of every dollar you earn before taxes.
4. Set aside an emergency fund equal to about 6 months of living expenses. If you’re nearing retirement, increase this to 3-5 years of living expenses in cash.
5. Invest wisely and simply.
6. Plan for unexpected things to happen. Be flexible and adapt to changing times, but be consistent too. Be not swayed by passing events.
7. Worry about the things you can control and release the rest. You control how much you save, how much you save, the quality of your relationships and the quality of your work. Don’t worry about the economy, stock markets or anything else outside your control.

That’s it. My approach to being intentional and taking control of your finances is uncomplicated. If you need a little help implementing one or more parts of this prescription once in awhile, that’s okay. Ask your CPA and fee-only financial planner for advice if you need it. Remember that you’re in charge because it’s your money. Make smart choices and get on with your life.