Focusing on the essentials

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Focusing on Essentials

By Brad Pistole

There are more than 17,600 personal finance blogs and millions of money websites on the internet.

The plethora of financial websites, blogs and videos have created an information “weariness” and confusion. This overload prevents many people from absorbing and implementing the excellent advice these sites offer.

That’s why it is beneficial to distill some of the copious money advice into basic financial wisdom tenets. Get a handle on these simple concepts, and you’ll make progress toward whatever financial goals you might have and gain some peace of mind.

Brad Pistole of Ozark, Mo., is farmer and a Certified Financial Fiduciary®, Certified Annuity Specialist®, and CEO of Trinity Insurance & Financial Services, INC.

Personal Finance Concepts to Help You Prosper

Know thy money. Without financial awareness, everything you try and accomplish with your money will be less effective and more challenging. We live in a transactional society where ATMs and online accounts make it easy to transfer money without pain. That makes it much easier to spend mindlessly because you can’t see the immediate impact on your credit and your net worth.

However, financial well being is incumbent on how well you know what flows in and out of all your accounts at any given moment. You should have a system, whether it employs software like Quicken, uses spreadsheets, or is a cloud-based platform that allows you to see all your accounts at once.

Financial awareness is not a budget in the traditional sense but more like a dashboard. It will give you constant readings of where you are and where you are going and warning lights to alert you to potential problems.

Understand your fixed expenses and your variable expenses and optimize them.

Once you have achieved a degree of financial awareness, you can take a more in-depth look at your variable and fixed expenses. Fixed expenses include your mortgage or rent, utilities, homeowner’s dues, childcare expenses and other monthly bills. Variable expenses include groceries, entertainment, subscriptions, and gym memberships. Once you have identified and categorized these expenses, you can then look for ways to lower these expenses or eliminate them. Even with fixed costs, such as automobile insurance, you may be able to lower your rates.

You should look at every expense and ask yourself, “Am I getting this at the best possible price?” As your list of expenses grows, you might also decide to eliminate everything you don’t use or use rarely.

Build up your emergency and short-term savings funds.

Many financial planners advise having at least six months of living expenses set aside to cope with things such as medical emergencies or the loss of a job. You should also know that there are techniques for turbocharging these emergency accounts to achieve some growth while they are waiting to be used.

Having cash set aside helps you avoid turning to credit cards or loans other than acquiring other kinds of debt that aren’t useful.

The Takeaway

Creating a financial life plan doesn’t have to be overly complicated. By following these basic principles, you will create a foundation of financial awareness and will be better able to fix problems that are costing you money.

Breaking free of a transactional mindset will allow you to live a more focused, goal-oriented and prosperous life, and achieve a less stressful, more prosperous retirement.