Basic Financial Planning

No matter what your income level, basic financial planning is a must. In order for money to provide you with options, you'll have to have at least a small "pile" of it somewhere. This will require actions to support conservation of money so you can build some wealth.

The idea behind a basic plan for your money is "if you don't know where you're going, then any road will get you there." With money, you'll want to have some financial goal in mind, so basic planning is necessary.

Before we look at any tactics that you might employ, please keep in mind that the discussion below is intended to be basic financial planning, so it's very basic in nature. I'm not a financial adviser. I'm most familiar with what has worked well for me, so I want to share it with you.

Bear in mind that with respect to basic financial planning, I'm conservative by nature, and you might want to be more aggressive (non-conservative) with your financial planning. Also keep in mind that many things are not predictable. You might have to make an exception to your financial plan and consider getting a cash advance on occasion to address urgent matters that have a way of presenting themselves.

Curb Spending

I know it sounds simplistic, but this is the backbone of basic financial planning. It's essential if you expect to have something left over to save. If you spend it all, you'll have nothing to save. You need to do things to make your money go farther, so you can accumulate savings. Some people just have a knack for saving. Others use home and business software to track expenses. Regardless of the method, if it works, stick with it!

Things like avoiding expenditures and buying less expensive things are good places to start. Saying it is one thing, but doing it is quite another. This is where you need to sort out between need vs want.

Spend less by implementing some of these frugal living tips and trying some of these money saving ideas.

If you ever wonder how it is that people are living debt free, I can tell you one thing for certain, their approach to basic financial planning includes very well thought out spending decisions.


There are some basic ways to save money, so start implementing some of them as part of basic financial planning.

Informal Savings One place to start on your way to having something other than what comes in every month is to have a "cookie jar" approach to savings. Coins from my pockets find their way into jars. If you save your change, it's a good way of getting coins out of the way. Over a few years, it can amount to thousands of dollars.

I've also put cash away, a little at a time, inside a fireproof safe. Again, over a couple of years, you can accumulate thousands of dollars. In the event of a natural disaster, cash is what always works, so it's nice to have some on hand. Cash should be part of your emergency preparedness checklist.

Formal saving. This is an approach to accumulating wealth by having something like a savings account at a bank. It's the old "a penny saved is a penny earned" approach. There is a lot to be said for that approach.

The biggest problem people have with basic financial planning is keeping money out of our own hands, so a savings account is a good place to start, even if you make no interest on your savings. If money isn't in your hands, you aren't tempted to spend it.

I established formal savings to help me buy my home, and later to pay it off. It was part of my plan for how to become debt free, and it served me well. My money was tucked away out of sight until I needed it for that specific purpose.

Budgeted savings. This is a more formal approach to savings where you might have an account set up for a new (or different) car, college classes, vacation, or something else you need to save for. Don't forget about having an emergency fund to address the unexpected problems that will arise on occasion. You can have money direct deposited, or you can allocate funds manually from your main savings account.

Protection of your Financial Resources

Okay, so your basic financial planning has done well for you and you've managed to accumulate a bit of cash, so now what? Well, you'll want to provide your nest egg some sort of protection. You won't be managing money for long if you leave it in a vulnerable position under unfavorable circumstances.

Banks. Here is the first place you should consider putting your money. They are hardened facilities that often offer insurance for depositors. There are many forms of bank accounts that you can consider opening to safeguard your money.

Here are the basics about a bank for those of you who often wonder "what is a bank?", and for those of you who don't have a bank account yet.

One of the reasons (perhaps just an excuse) for not having a bank account is insufficient funds to meet the minimum deposit requirement. Another reason is bank fees. If the assessment of fees is holding you back, then let's learn about bank fees and get over this concern.

Combination Safe. If you keep emergency money around the house, it's best to keep that in a safe place - safe from theft, fire and natural disasters. A combination safe is a good investment to secure your cash and other small valuables.

Insurance. You might not think of insurance as a form of protection of your financial assets, but it really can be. If you suffer a loss, it would be nice to have insurance to cover the loss, or at least most of it, so the loss doesn't erode your savings.

You should consider various forms of insurance as protection for your money. It should be a part of your approach to basic financial planning.

Investing Money so it Works for You

It is always a good thing to have your money work for you. There are a number of choices. Making some return on your money is better than nothing, but you also have to be mindful of the risks involved. Here are some options to consider.

Investing in financial instruments. Here is an approach where you make your money work for you by making money from others that pay you to use your money. You might choose stocks, bonds, certificates of deposit or other financial instruments as a means of managing money to cause it to create more money for you.

Investing in precious material. This approach involves exchanging money for gold, silver, jewels or other precious material that you anticipate will increase in value over time, or at least hold their value.

Investing in tangible assets. This is a common approach to making money work for you, but not normally thought of as an investment strategy. This aspect of money management involves purchasing something, making it work for you, and then selling it again.

A home is a typical example of an investment that gives you the benefit of a place to live and an increase in value as the price of homes typically rise over time. It's a great approach to managing money because you live inside your investment.

Purchasing equipment, tools, and other assets can be a form of investment as well. Buy a tool and do it yourself instead of paying someone to do it for you. This either conserves your money as a homeowner or it makes you money as a contractor. In either case, you can recoup most if not all of your investment by selling the asset when you are through using it.

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