Your Life Vision, Your Financial Vision, Your Everyday Choices in Plain English
Your Financial Vision is part of the Monetizing Strategy for your Life Vision.
It helps to know your goals. What you want out of life? How you want to be known?
More importantly, even if you are undecided on your goals: what are you going to actually get done financially, be able to manage and upkeep?
Budgets, Mortgages, Student Loans, Credit Cards, Savings, 401Ks, IRAs etc. are tools that we can use to achieve our goals, but not every tool is right for us and not every tool is needed.
Ask yourself, Why I am spending this money? What Am I getting for my money? Does this money help me achieve what I really want? Don’t lie to yourself.
A few things to think about:
Should I have a Budget?
Yes, but it does not have to be belaboring or painful. It should be realistic and allow you to manage your finances. Having a budget should be motivation to achieve your goals and enjoy life. It should support the things you want to do and encourage you to spend on what helps you best get where you want to go.
Should I Buy a home?
It depends. If you can comfortably afford the monthly payments and all of the upkeep (or buy it with cash you can afford to spend) then sure. If you can't, then NO, it can quickly become a stressful liability. There are many ways to invest your money. Buying a home is just one of them.
Should I buy a car?
Sure, if you can comfortably afford the payments and the upkeep (or buy it with cash you can afford to spend), if not it will quickly become a stressful liability. Public Transportation, biking or walking can be less expensive and better for your health the environment. It can give you time to read, think, study etc.
Should I use credit cards?
Only for the following:
1. Emergencies (that means medical or dangerous situations)
2. To get rewards or points if there are no penalty, fees or interest rates and you can manage the account and pay it off in such a way where the fees and interest does not exceed the amount of the reward. Other than that, NO. If that sounds belaboring and complicated, then NO.
You do not need to use credit cards as part of the budgeting process. You can use multiple no-fee checking or saving accounts to manage your money. If you are NOT going to use credit wisely, then you don’t need personal credit.
Credit is best used by businesses to fund successful ventures that can generate a profit. For personal borrowers credit is generally not the best tool, of course there are exceptions, but they are few and far between.
Should I save?
You should have an emergency fund. It should be 9 or more months of your monthly bills. If you debt is paid then you should save or invest your money in manageable investments. If your debt is not paid, then you should invest in your debt. Simply put, you should be paying off your Credit cards, Mortgage etc., particulary if the interest on the debt exceeds the amount you are getting from the savings/investment account.
Should I invest in the Stock Market or other Security Backed Funds?
You should only invest what you are prepared to lose. This is the case with any and all investments; stocks or otherwise. If you can comfortably lose $1000 without it being a hardship to you or your loved ones then you may consider investing the $1000. If you can NOT afford to lose the money then it would be best used, paying your bills, adding it to your emergency fund, investing in your debt, or saving it in a simple bank account.
Any account you open, saving, credit etc. is an account you have to manage. Even if it says there are no fees there could still be tax liabilities and other risk. You have to be honest with yourself about what you are prepared to manage and what you are not. Knowing your life goals and being realistic about your skills and habits will help you determine the best ways to organize your finances. Too much risk is any decision that causes you so much stress that it is difficult to recover from it and function normally. Each dollar spent is a decision that you make that can move you closer to or away from your goals.
These tips are to be used at your own risk. For the best strategies you should always consult a certified financial professional.