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Career Corner: Personal Financial Plan—Do You Have One?

Posted By Tashania Morris, MSHRM, ALS, CDF, CPC, Monday, September 19, 2016
Updated: Tuesday, September 13, 2016

Most people work to earn a living in order to take care of their families and create a better future.  Compensation is sometimes used by companies as a strategic advantage to attract and retain the best candidates.  It can be a great motivator when rewarding employees. If money is so important, why do so many people know so little about it?  According to a report on the Economic Well-Being of U.S. Households in 2015, “31 percent, or approximately 76 million adults, are either ‘struggling to get by’ or are ‘just getting by.’”1  The report also states that “[n]early half of adults are ill-prepared for a financial disruption and would struggle to cover emergency expenses should they arise.  Forty-six percent of adults say they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money.”  The statistics are staggering; it is no longer enough to say, “I am not a numbers person” when it comes to your personal finance—you need to become one.  If you spend 40 hours helping to build the bottom line of your organization, you need to do the same for yourself.  My father once told me, “It is not how much you make. It is how much you save.”  Too many people are working for 20-30 years only to reach retirement and not have enough to live on.  Remember, this is about “Corporation Me.”  Money is one aspect of personal development that is not talked about enough.  If you are creating a business plan for “Corporation Me,” a financial plan is a major part of it. 

What are your values?

It is important to figure out your relationship towards your money and the role it plays in your life.  What is your value system based on?  For some, money means power and to others it is just a necessary evil.  Dave Ramsey states that financial management is “80% behavior and 20% know how.”  During my undergrad years, I spent most of my money on clothes.  Since then, my value system has changed and I am much more frugal than I used to be.  During that phase of my life, I learned a valuable lesson that if I did not learn to manage my money, it would surely manage me.  Think about what is important to you and make a list.  Does your spending reflect what you value?  Take this quiz to find out what kind of spender you are—http://goo.gl/biJaG4.

Understand your current net worth:  become aware of your situation

In order to understand how to move forward, you will have to know where you are today.  Evaluate your current situation.  Too often people have a skewed vision of their finances until the numbers are on paper.  Write it down or type it up—just get it out of your head.  Calculate your net worth.  In order to calculate this, you can easily use an Excel spreadsheet or go online and use a calculator.  I found a really cool calculator to get you started—http://goo.gl/wIm6Z2.

Monthly spending plan

Creating a monthly spending plan is essential to achieving your financial goals.  In order to get an accurate account of where your money is going, you will need to know your spending habits.  A part of creating your monthly spending plan will be tracking your daily activities.  You will need to figure out where your money is going.  Record every expense no matter how small.  I love doing this even though it can be tedious.  Recently I fell off track and began buying lunch on a daily basis instead of taking my lunch to work as I am accustomed to doing.  At $10 a day, I was spending $50 for the week, which adds up to $200 a month, not including having dinner with family and friends.  This realization prompted me to do something about it.  I simply started bringing my lunch again and treating myself on Fridays or on payday.  You will need to know your fixed expenses, variable expenses, and discretionary expenses.  Creating a spending plan will allow you to figure out your needs and wants.  Believe it or not, it will be a true reflection of how you value your money.  I cannot begin to tell you how shocked I was when I realized once again how much I was spending on food.  A great resource to help track your money is mint.com or you can download an app like Money Lover or Expense IQ.  www.mint.com

Create a SMART money plan

Based on your spending you will need to create a plan of action.  This will require discipline and constraint.  By reviewing your budget, you will get an accurate view of your money.  It is important to note that money problems don’t just affect you, they also affect your family members and your state of well-being.  Create financial goals and celebrate each win.  Track your successes and failures.  Learn from your failure and make the necessary adjustments to move forward.  A money plan should include paying off debt, your financial goals, building wealth and, most importantly, retirement planning.  If you died tomorrow, would your family be protected?  Would they know exactly what to do or would they have to figure it out on their own in addition to grieving?  This is a great website to access a host of financial information and forms you can use for the planning process—http://www.balancepro.net/forms.html.

Getting out of debt and understanding how credit works

Sometimes being in debt can be suffocating.  It is important to get out of debt and taking baby steps is also important.  Some people ignore it with the hopes of it going away but it hardly ever does.  Being in debt can affect your career and/or your work productivity.  If you are not in the best frame of mind, you will not be able to do your best work because your thoughts will be preoccupied with your money situation.  Sometimes as a result of being in a bad financial situation, good people will make unethical decisions in order to make additional income.  It might be getting entangled in a quid pro quo situation they had no business being involved in.  It impacts more than just your pocketbook. 

Most people have credit cards and have used credit; however, they do not really know how credit works.  They have no idea how to clear up inaccuracies on their credit report or how to improve their credit scores.  Some people are not even aware that they are entitled to a free credit report every year which can be accessed at https://www.annualcreditreport.com/index.action.

Get a financial advisor

At my previous job I signed up for a retirement account and it was then I realized how little I knew about investments and/or retirement planning.  I chose a couple of stocks after briefly listening to a representative speak about what the company offers.  I remember feeling so unsure because I did not understand what I was doing.  I had no guidance or wise counsel to help me in the process.  I figured I would leave it up to time.  I did not know the value of having a financial advisor until I had to find one for a family member.  One of the most important things we looked for was finding someone with a teacher’s heart—someone who wants to act in the best interests of the client.  I also prepared a list of questions to ask and I suggest you do the same.  Some advisors welcomed the questions and others were not so welcoming.  They were more concerned about the amount of the investment.  Some advisors get paid by commission, fee based, or fee only.  You need to understand the differences.  How they are paid might change the service you are given.  If you need additional information on how to get a financial advisor, visit this site, http://www.letsmakeaplan.org/learning-center, or do a quick Google search.

Remember, “Corporation Me” needs to understand how money works—your retirement depends on it. 


1. http://www.federalreserve.gov/2015-report-economic-well-being-us-households-201605.pdf


 

Tashania Morris, MSHRM, ALS, CDF, CPC, started her career as a paralegal.  She has over six years’ experience in the legal field specializing in the areas of foreclosure and bankruptcy.  She recently completed her master’s degree in human resource management which has equipped her with the tools needed to think strategically and develop creative solutions to problems in the workplace.  As a Certified Professional Coach and Career Development Facilitator, she loves all things career and personal development.  She is able to recognize people’s skills and abilities and enjoys working with individuals to figure out their “why.”  Her mission is to engage, empower, educate, and promote change from within.  If you have any questions about any of the articles written, suggestions about something you would like Tashania to write about, or enjoyed reading the article, send her a quick note.  You can reach Tashania at Tashania_m@hotmail.com.

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