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Personal Financial Planning

In the economic environment of today, personal financial planning is a crucial function. We all can manage our finances better to meet our goals and objectives. Effectively managing finances results from an organized process called personal money management or personal financial planning.

So Exactly What Is Personal Financial Planning?

Generally, personal financial planning is managing your money to achieve personal economic satisfaction. The process allows you to control your financial situation. Every household is different and has unique financial goals and objectives. Therefore, financial activity needs to be carefully planned to meet specific needs and goals. The process consists of six logical steps designed to set you on the right path with your finances. They are based on your goals and objectives and once you reach step six, would start the process again. A financial counselor can help you with all these steps.

Step 1: Determine Current Situation

In this first step, you will determine your current financial situation concerning income, living expenses debt, and savings. Prepare a balance sheet or a list of current asset and debt balances to determine net worth. The net worth statement should be completed once a yer and the information in it will give a foundation for financial planning activities.

Step 2: Develop Financial Goals

Specific financial goals are vital to financial planning and developed in this step. Your financial goal can range from spending your current income to developing a saving and investment strategy for your future financial security. Analyze your financial values and goals. This involves identifying your feelings about money and why you feel that way you do. The purpose of this analysis is to determine needs and then wants.

Step 3: Identify Alternative Courses of Action

Based on your financial situation, alternative courses of action are developed in this step to meet goals and objectives. Creating alternatives is crucial for making good decisions because many factors will influence the available alternatives. The more possible alternatives you have, the more effective and satisfying decisions can be made. Be creative, creativity in decisions making is vital to effective choices.

Step 4: Evaluate Alternatives

Next, you need to evaluate possible courses of action, considering your life situation, personal values, current economic conditions, and financial situation. Every decision has a consequence, and every choice closes off other alternatives. Decision-making will be an ongoing part of your personal and financial situation. Thus, you will also need to consider the lost opportunities resulting from your decisions.

Step 5: Create and Implement a Financial Action Plan

In this step of the financial planning process, an action plan is developed to achieve your goals and objectives. This requires choosing ways to achieve your goals based on the data you collected in previous steps. As you reach your short-term goals, your next priority goal will come into focus.

To implement your financial action plan, you may need help from others, such as a financial coach or insurance agent. Your financial team should consist of professionals; you should choose them with care.

Step 6: Reevaluate and Revise Your Plan

Financial planning is dynamic and does not end when you take a particular action. Regularly you will need to assess your financial decisions based on changing personal, social, and economic factors. Life events such as a job change or the birth of a child will affect your financial needs. The financial planning process provides a vehicle for adapting to those changes. Regularly reviewing your plan will help you make priority adjustments that align your financial goals and activities with your current life situation.


Relevant information is required at each stage of the decision-making process. Changing personal, social, and economic conditions will need you to continually supplement and update your knowledge and plans. A financial counselor can help you.

Personal financial planning will give you increased control over your financial situation by avoiding debt and dependence on others for financial security. Additionally, freedom from financial worries by looking to the future and anticipating expenses. A well-planned and communicated plan could improve personal relationships. If done effectively, personal financial planning is a win-win for everyone involved.

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What is Wealth?

What is wealth? Most people will tell you that they want to be wealthy, but what exactly is wealth, and what does it mean to be wealthy? Why do people want to be wealthy? Why are they not wealthy? Isn’t cash king? Maybe they are wealthy and do not know it. Does anybody know?

If you want to be wealthy and create wealth, it helps to understand what it is and what it’s not. Wealth is as old as human history. Wealth is all the stuff we want, and, I believe, you can have wealth without having a lot of money.

What Exactly is Wealth 

The word wealth is derived from the old English word wela, which is from an Indo-European word stem. Some define wealth as the abundance of valuable resources. However, the meaning of wealth is context-dependent, and there is no universally agreed-upon definition.

Generally, economists define wealth as anything of value. Therefore, if an individual, community, region, or country possesses a large number of valuable resources, they are perceived as wealthy. Some see wealth as the net worth, the most common measure of wealth, of a person, household, or nation. Net worth is determined by subtracting liabilities, what you owe from assets., what you own of value.

The Wealth of Nations

In the book, The Wealth of Nations, by Adam Smith, he described wealth as “the annual produce of the land and labor of the society”.In this context, produce is that which satisfies needs and wants. He saw wealth creation as the combination of materials, labor, land, and technology in such a way as to capture a profit. 

Another definition of wealth is controlling or possessing an abundance of items of economic value. A wealthy individual, family, or nation has accumulated substantially more than their peers and others in their society or group of reference. Measurable wealth typically excludes intangible assets such as human and social capital. The opposite of wealth is destitution.

Wealth Vs. Money

I believe wealth is what we should seek and aspire to, and not necessarily money. Consider this, if wealth is so important and everyone wants to be wealthy, why does money get so much more attention? Do we want money or wealth? Money and wealth are not the same things. Having a supportive and loving family and great friends in abundance is considered wealth by some people.  

Wealth is a mindset. Perhaps you are more wealthy than you believe you are.

Wealth is not new. Historically, the sheep owner that owned more sheep was considered wealthier than the one with fewer. It is money that is a comparatively recent invention.

Some think that businesses make money, and some think they create wealth. They create wealth by doing, making, or supplying what people want. Still, want to be wealthy? Perhaps you are wealthier than you think. What are your thoughts on wealth?

Setting Boundaries for Money and Your Spending Plan

One of the hardest things to do is to stick to a spending plan. There are a lot of unknowns when developing a spending plan, and unexpected expenses like car repairs and medical illnesses happen all the time. Have you thought about setting boundaries for your money?

Often it is our experience with and around money that affects how we handle money and our relationship with it. How you see money affects your relationship with it and understanding this could be a key to managing it better. We all have a relationship with money. Your relationship with money probably started when you were young. How did your parents handle money? Where arguments about money common? 

Learn from your experiences and use them to manage money and your spending plan. One way to improve your relationship with money is to set boundaries. Below are several tips to help you set boundaries for your money. 

Time Limits

Set a time limit rule about spending money. The rule would say you will not buy anything over a specific amount, $200 unless you think about it for 24-48 hours. During this time, you are asking yourself why you need to buy this item and how to pay for it. This rule will make you think about spending, something many of us do not do. 

Use Friends and Family as a Boundary

Set a specific dollar limit above which you will discuss non-essential purchases with friends or family. Sometimes spending money is all about emotions and getting buy-in from friends and family will sometimes take emotions out of the picture, and the focus can be on the want or need.  

Set a Pay-in-Full Rule

Another way to stay inside the boundaries of your spending plan is to set a pay-in-full rule. Map or plan out when and how you will pay off the item in full. The rule could state that if you cannot pay for an item in full by a certain time frame, which could be today, next week, or next month, you do not buy it. 

The Layaway Option

Consider layaway as an option to stay within your budget or spending plan. After you determine that you truly need an item but just cannot afford to pay for it in full today, think about buying it on layaway. Many companies have brought back layaway. It is a good option for some who need it right now but cannot afford it right now.

Use Cash as a Boundary

Use cash to make purchases. Cash still works most places. Studies have shown that when you use cash to make purchases, you spend less. It seems that the cash leaving your purse, pocket, hand, and wallet, hurts more than the plastic stuff.

Incorporating one or two of these doable tips will help you stay within the boundaries of your spending plan. They will also help you manage your money better by helping you understand your relationship with money. Use what works best for you. Your relationship with money is different than your neighbor’s.

Why You Need a Financial Coach

Financial coaching

I was listening to a podcast, and the topic was teaching financial literacy in high school. According to the podcast, currently, 21 states now have personal finance coursework requirements in their high schools. Overall, 45 states require some form of finance instruction in their K-12 standards.

The podcast was interesting to me as I think I took a course in high school, but I really do not remember it….that was a long time ago. Studies have shown that though financial education in schools is important, it doesn’t always predict financial literacy among adults. For example, even though I took a course, I did not know what a mortgage was until I had one. I have been very blessed to make financial mistakes and still able to overcome them. I have made a lot of financial mistakes.

As I listened to the podcast, I thought of all the people who, like me, had to learn the hard way to manage money. Through mistakes and experience, some learned, and some did not. And this drives me to educate others about finances and coach and counsel people to make better financial decisions.

Why a Financial Coach

Financial coaches work with you over time and help you create short and long-term financial goals. They meet with you regularly and give suggestions and exercises to help you explore your values and meet your financial goals. Coaches also discuss ways to stay on track and ask how developed plans and strategies are working.

Financial coaches provide advice and encouragement in a client driven process. Financial coaching is not designed to be a therapeutic relationship or to aid clients in a more acute crisis resolution. That is where financial counseling comes into play.

The Value of a Financial Coach

The great value in coaching is the ongoing relationship and not just one or two appointments. A coach is a sounding board, your accountability partner, your brainstorming partner, and cheerleader. Financial coaches support you as you reach for financial goals creating healthy financial habits.

You determine your goals with help from your coach. Together, you and your coach map out action steps and time frames. And knowing you must check in with your coach helps prompt you to complete those steps. Studies report the effectiveness of financial coaching.

When to Seek a Financial Coach

If you are ready to look to your financial future.

•           You have goals like buying a car, a home, or a realistic spending plan.

•           You are ready to commit to the ongoing work.

•           You’re ready to welcome support in your efforts.

Coaches give vision to the team. They direct and lead the team. Coaches push and pull and bring out the best in the team. And as a financial coach, I provide the same for my clients.

Kick-Start Your Savings

The saving rate in America this year has been between 5.8% and 5.1% thru June of 2022, however, it’s not where it needs to be. Start today and kick-start your savings. Saving for retirement and having adequate emergency savings for unexpected expenditures such as car repairs or medical expenses is a big part of being financially secure. 

Make Saving a Priority

The mindset of saving must change, and we must realize and make it a priority. Make saving a priority by setting saving goals and developing a plan to meet them. Then, continually assess progress and take action to meet goals when needed. You need a spending plan.

Below are five tips to kick-start your saving:

1. Pay off high-interest debt. The best investment most borrowers can make, is to pay off high-interest consumer debt. For example, if you have a $3,000 credit card balance at 19 percent, and you only pay the minimum payment of 1 to 3 percent of the balance or $20 – $35, whichever is greater, it will take more than 30 years to pay off the loan. With accumulating interest, you will pay more than the item cost in interest charges.

2. Buy a home and pay off the mortgage before you retire. The largest asset of most middle-income families is their home equity. Once you make the last mortgage payment, you will have far lower housing expenses. Further, you have an asset that appreciates and can be borrowed against in emergencies or converted into cash through the sale of the home.

3. Participate in a work-related retirement saving program. Many employees turn down free money from their employer by not signing up for a work-related retirement program such as a 401k plan. If you do decide to participate, with a dollar-for-dollar match that some companies provide, you could likely receive an annual yield of greater than 50 percent of their investment or more.

4. Outside of work, save monthly through an automatic transfer from checking to savings. A great way to start saving because what you don’t see, you probably won’t miss. These savings will provide funds for emergencies, home purchases, school tuition, or retirement. Most banking institutions will, on request, automatically transfer funds monthly from your checking account to a savings account, U.S. Saving Bond, or stock mutual fund. 

5. Earn up to 9.62 percent or more with U.S. Series I Savings Bonds. The composite or earning rate for I bonds issued from May 2022 through October 2022 is 9.62 percent. This rate applies for the first six months you own the bond. I bond earns interest monthly from the first day of the month on the issue date. The interest accrues until the bond reaches 30 years or you cash the bond, whichever comes first. The interest is compounded semiannually. Every six months from the bond’s issue date, interest the bond earned in the six previous months is added to the bond’s principal value, creating a new principal value. Interest is then earned on the new principal. You can cash the bond after 12 months. However, if you cash the bond before it is five years old, you lose the last three months of interest.

Final Thoughts on Saving

Once you realize the need to save, develop a savings goal and kick start your savings.

If you do not have an emergency fund, make this your first savings goal, and then commit to $300, and then $500 on your way to a $1000 emergency fund.  

Devise a plan, strategy, or vehicle to meet the goal. Create a spending plan. Try one or two of the tips above, and in time, you will be on your way to meeting your goal and improving your financial situation.

The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.