Personal Capital is one of my favorite personal finance tools for tracking net worth, income, expenses and investments. They also have a nifty retirement planner that allows you to tweak a number of factors and simulate your projected retirement portfolio. The best part? Their tools are 100% free to use and easy to manage. They do offer professional wealth management services for a fee for investors who are interested.
To get started, sign up for a free Personal Capital account and start linking savings, checking, retirement, investment and credit card accounts. They will import your data and start building your personalized financial summary. A unique feature offered by Personal Capital is the ability to manually add “other assets” that cannot be automatically linked or accounted for, such as house value, manual investments and other assets/liabilities.
Once you’ve achieved a solid financial foundation and are committed to a lifestyle of living below your means, you’ll have extra money available each month to fund your financial priorities and build long-term wealth. The question becomes where should you be focusing that surplus of cash to maximize your returns? There are a lot of considerations to take into account. The emotional aspects of having enough cash available for emergencies. Understanding the tax advantages or disadvantages of various types of retirement, health care savings and non-retirement accounts. Making the best use of employer retirement account matches and other benefits.
The list below is a guide on where to focus investments across a variety of accounts to maximize returns and improve the tax efficiency of your portfolio. As you fully fund each recommended step, move onto the next step and continue to grow wealth. Everyone’s personal situation is different, so use this as a guide, but modify it to meet your own needs and take advantage of options that may be unique to your situation.
Once you have a budget established, start taking small (and large!) steps to cut down unnecessary expenses. Today’s money saving edition: Online Shopping.
If you already do a lot of shopping online, it’s time to re-evaluate and see how many of those items are needs versus wants. The easiest way to save money is to simply not spend it on unnecessary items, however, online shopping is a staple in most households nowadays. If you’re going to shop online, be sure to do it wisely. I’m a huge fan of the convenience online shopping offers, paired with the ability to “find deals” from the comfort of my couch. Over the years, I’ve developed a few habits to ensure I’m getting the best deal possible and to also temper impulse purchases.
Financial Security. We all need it. Whether you are trying to break away from the cycle of living paycheck-to-paycheck or focusing on building long-term wealth, there are a few key steps that will allow you to achieve a solid financial foundation. Once you establish (and automate!) good money management habits, future financial gains will come much much easier.
Ready to get started on the journey to financial well-being? These steps will help get you pointed in the right direction.
Financial stability is about more than just the money. It’s about peace of mind and knowing that if an unexpected event occurs, you are prepared to handle it. A study in December 2015 showed that 63% of Americans do not have enough savings to cover a single $500 unexpected expense. $500 is a moderate car repair. An emergency trip to the vet. Repairing a broken furnace in the middle of winter.
“Beware of little expenses; a small leak will sink a great ship.” ~Benjamin Franklin
Creating your first budget can definitely seem overwhelming, but if you’re looking to get ahead financially, it’s a must have. There is no compromising on this one. The most basic rule of building wealth is living a lifestyle in which you earn more than you spend. Sadly, just like calories in that delicious piece of chocolate cake… we often grossly underestimate how much we’re spending (or consuming!) when we’re not keeping track. A budget is an estimation of your income minus your expenses over a given period of time, typically a month for personal finance purposes. Once you understand your monthly budget, you can start optimizing and making conscientious decisions to improve your financial well-being.
Prior to starting a detailed budget, I highly recommend everyone calculate their net worth. This exercise will give you a bird’s eye view of your overall financial picture and allow you to track financial advancement as time progresses.
Financial independence is something that many of us secretly (or not so secretly!) long for, but have no idea where to even start. Unfortunately, unless you’re a trust fund baby, the recipient of a massive inheritance or a really lucky lottery winner, achieving financial independence at a young age may seem unachievable. It’s a daunting task, but by starting now and taking control of your financial future now, it will open up more options in the future. Most people can’t afford to retire at age 35, 45 or even 55, but with a little financial awareness and planning, many of us can shave a few years off our targeted retirement age and enter retirement with a strong financial picture.
So how does one get started on this mystical journey? The very first step to financial freedom is to analyze your current financial situation. Are you already in good shape? Buried in debt? It’s very difficult to make a realistic financial plan without knowing your starting point, so let’s get started!