Joseph A Leonard - Wealth Management & Consulting

Financial management covers a wide range of money topics such as budgeting, expenses, debt, saving, and retirement planning. Seeing how they go hand-in-hand can help you lay a solid financial foundation for yourself and your family.

Budget

Unfortunately, many families skip right over this step in the financial management process, and that’s a big mistake. We are faced most days with many decisions about what to do with the limited money we have in hand, and it’s difficult to remember everything. It’s better to create a budget and commit it to paper to avoid overspending, debt problems, or spending on things you don’t need.

With a budget, you can see clearly how much money you have, where it goes, and whether you have any left over. Besides, once you have this picture, you can begin to think about ways to optimize spending and cut out waste. Financial management at this level is how you get ahead, no matter what your income.

Getting out of Debt

When you begin to be realistic in your financial management, you’ll probably find that you have debt that will limit how much control you can bring to the process. Using credit wisely isn’t a bad thing, but you need to be sure that the debt you have is the good kind and not the bad kind.

The mortgage or debt that you take on to buy a home amounts to a lot of debt. However, this is usually good debt. In the first place, you must have a place to live for yourself and your family, so you either must rent or buy. If you buy, you can usually get a low interest rate, and you will be investing in an asset that will become more valuable in time in addition to giving your family the security of owning their own home.

However, if you go to the mall and have a shopping spree using a credit card with 22% interest and don’t pay it off right away—this is bad debt. Once your financial management plan kicks in, you will want to avoid this kind of unnecessary spending and the burden it puts on your ability to get ahead.

Pay more than the minimum each month. This is the first step to getting out of debt. The second one is to lower your interest rate. Talk to your credit card company first and see if you can negotiate interest. If not, you might want to look at other ways to lower the rate such as getting a bank loan and paying off all credit cards.

Saving for Retirement

With fewer companies offering pension plans and the uncertainty of Social Security, it’s important for you to be realistic about planning for retirement as a part of your financial management plan. Many feel that they don’t have enough left over to put aside any money for retirement.

Retirement savings as a part of your financial management plan is not an afterthought. It’s a priority. The IRS offers special tax-advantaged accounts such as employer 401(K) plans. Also, individual retirement accounts and special retirement accounts have been set up by IRA for the self-employed. Included in the benefits that come with these are tax deductions, tax credits, and tax-free earnings on retirement savings.

Even if you are just starting a family and just beginning to earn your own living, don’t fail to devote time to financial management. Or if you’re half-way through your earning years or even later, it’s not too late to do this. Having a financial management plan will pay off in ways you may not have dreamed.

Ask Joseph Leonard and Coastal Investment Advisors for additional personal finance advice or learn money management tips on financial management by downloading this free financial management guide.