MONEY/FINANCE

THE CHALLENGE

The subject of finances is complex - one can study money for years and still just scratch the surface of the knowledge available. This may explain why so many people in the world of finance are drawn to specialties - stock broker, mortgage officer, commercial loans expert, mutual fund salesperson, insurance agent, etc.. The list is long and varied, and the fields of study are all very specific. Each of these people participate as individual players in a complex game, and their expertise forms only a part of the whole picture.

Additionally, there are issues such as taxes, legalities (corporate entities, best practices, etc.),  and investment options which run the gamut from residential real estate to stock portfolios, with resident experts in each respective area.

Add to this the fact that we are not taught about the ins and outs of money in our schools - we don’t even receive basic knowledge - Money 101. Were you ever taught how to survive financially, let alone thrive and be prosperous (make your money work for you)? Many people, if they manage to save any money at all, have no idea where to put it and end up choosing inefficient but readily available vehicles such as savings accounts or government bonds - all because that is the only thing they’ve ever been exposed to. Unless you watch a business channel regularly, the above-mentioned options are likely the only investment options you’ve ever seen mentioned on mainstream television, along with some mutual fund choices which may make the salespeople more money than you are likely to make in the long run.

Is it any wonder the average person is confused and overwhelmed when it comes to the subject of money?

ARTICLE: Wealth - Your Financial Education

SOME CHOICES

As with many subjects, the best defense is a good offense. In the case of your finances, this offence involves several key ‘plays.’ You will find the main points below, along with some recommendations to get you started. The good news is, learning about money and watching YOUR money grow is lots of fun, once you acknowledge that what you are doing is extremely important to your future - a future of financial independence and freedom.

An Honest Look at Where You Are

This is the crucial first step which keeps many people from becoming financially free. There is so much emotion - including shame and fear - tied up in the subject of money that many people simply avoid it. Not only do they not discuss important money matters and plans with their spouses and families, they hide even from themselves and their habits and actions.

The truth is that until you know where you are you can never get where you want to be. By stepping up and owning your current situation, you can get past the pain and start with the fun part - the gain!

Here are some tips for starting with this task:

• Gather your paperwork - pay stubs, bills and statements - and create a basic personal financial statement.* This involves laying out, on paper, your monthly income and expenses. It does not have be complicated, and it should not be ‘padded.’ It’s OK - and perfectly normal - to have the balance be negative. As in, you owe or spend more than you make. If that wasn’t the case, you would not be experiencing difficulties in the first place. Try and separate yourself from the numbers and just be honest.

  *Basic personal financial statements will include your income/expense sheet (Income Statement) and assets/liabilities sheet (Balance Sheet). Understanding these numbers as they relate to you is part of a basic financial education and does not need to be complex. You can find personal financial statements to fill out at your local library, bookstore, or many places online…or create your own. HERE is an excellent article with examples (it was written for small business owners but allows for simple and effective learning for anyone).

• Get a copy of your current credit report. Your credit rating and financial numbers are your ‘report card’ in the real world, and it is important to be familiar with yours. You can obtain copies from your national credit bureau/s, and it will be either free or a slight charge, depending on what country you live in. (Try Equifax in the U.S. and Canada.) Do so at least annually, and be sure to check them thoroughly. Credit reports can contain errors or old information which could be affecting you adversely without you even realizing it. You can contact any creditors and possibly the credit bureau to have outdated or incorrect information removed or corrected. This information is vital - it is used by everyone from banks and lending institutions to prospective employers - so make sure yours is correct and up-to-date.

  Should you have a lower than ideal credit rating due to poor judgement or problems in the past, there is nothing to be ashamed or afraid of. We all make mistakes and your credit history is NOT you. However, it is important and needs to be fixed - the good news is, it can be fixed. You can and should improve your credit rating. To learn more about this, try:

Your Credit Score: How to Fix, Improve and Protect the 3-Digit Number That Shapes Your Financial Future by renowned financial columnist Liz Pulliam-Weston

Credit Repair Magic instantly downloadable e-book - tips from a pro to get your credit report in order as quickly as possible.

Investing in a Financial Education

Now that you’ve taken an honest look at your situation, you may need to take steps to improve it. You may need to educate yourself a little financially in order to know what steps to take. You will also learn, as you go, what it is that you really want. For instance, you may have always thought that mutual funds were the way to go (perhaps becauase a salesperson told you so), but with your increasing financial IQ you discover new ways to invest and grow your money. Remember, you can take advice from financial ‘experts,’ but no one cares more about your money and your future than you do. Unless you have educated yourself enough about where your money is going to make an intelligent choice, your choices could be hurting you. This includes NOT making any choices becasue you are afraid. Knowledge trumps fear every time. We know it’s intimidating to begin a new study, especially in a realm as seemingly complex and cryptic as finances…that’s why hardly anyone does it. You’re not alone, however, and there is a growing trend toward becoming financially educated - finally! It’s about time we all learn about this crucial subject and take control of our financial futures. The truth is that the money basics are not that difficult, and as you learn you will gain confidence - in yourself and in your ability to do what’s best for you.

You can find resources in so many places, from your local library and bookstore, possible mentors you may know, the daily financial section of the newspaper/s, and even financial tv channles such as CNBC. Do not worry if you don’t understand everything at first - this is perfectly normal and will get better - consider it immersion! Go as slowly as you need to and absorb as much as you can. As with any subject of study, your brain has more capacity to absorb than you realize and will soon begin showing you what it’s learned. Here are some specific resources to start with as well:

Build Your Money Muscles by Joan Sotkin, founder of ProsperityPlace

Rich Dad, Poor Dad by Robert Kiyosaki - a fantastic discussion about the lack of financial education in schools, and most importantly a wealth of ideas on how to correct this problem NOW, in your own life

The Automatic Millionaire by David Bach - a look at what it really takes to create a healthy retirement fund

Break From the Crowd

Now that you are your way to increased financial IQ, you are also on your way to financial freedom - they really do go hand-in-hand. While you may or may not have the goal of becoming super-wealthy, your journey should nonetheless include some work on your self-confidence and your belief in what is possible for you.

Many people struggle in their efforts to achieve success, for various reasons. Some are pursuinggoals picked for them by others; some are plagued by inner beliefs instilled in childhood and affecting them unconsciously in the present; others still are stopped from reaching high by their fears of what their parents or peers may think.

Remember that to ensure true success you must define success on your own terms. You must give some deep consideration to what YOU want for your life and yourself - only you can say whether a million dollars in the bank is a worthy goal, because only your opinion counts in your own life.

The 7 Habits of Highly Effective People - Get to know your own deepest values and priorities and then live them by reading this brilliant book by Stephen Covey

Have a Plan

This is one spot where people get held up - they are afraid of having a financial plan. Perhaps they feel they don’t know enough, or haven’t enough money to warrant a plan. Do NOT let yourself think this way!

Your plan does not have to be complex, and putting your intentions down on paper will work wonders on your feelings of control and hopefulness. You can change, update and ratchet up your plans as you go and as you learn, but a clear plan is an essential step in taking control of your finances. By sitting down and formulating even a simple plan, you are ahead of 99% of the rest of the population. As you progress, you should include such things as insurance for emergencies/contingencies, financial and legal advice, investment planning and more.

Try The 9 Steps to Financial Freedom - Practical and Spiritual Steps So You Can Stop Worrying by Suze Orman, famous for her honest evaluations and advice to people in frightening and challenging financial situations.

Additional Considerations

One important aspect of the financial learning (and gaining!) curve is having the discipline to follow your plan. Contrary to popular conception, discipline comes not from sheer willpower, but from our inner beliefs. If we do not truly believe we can accomplish something, we will not strive for it. Similarly, if we don’t understand the importance of an action or the consequences of our behaviours, we will continue with our current habits, perhaps finding out too late that we are extremely unhappy with the destination. Many of the resources listed above can help with this process, but you must also be willing to look honestly at where you are headed if you don’t change anything. If this instills a little healthy fear and apprehension, let that be a great wake-up call. For inspiration and motivation, try the Women & Money blog and/or the Breathing Prosperity blog.

A final note: do not be afraid to ask for help. Although you should educate yourself as thoroughly and contunuously as possibel, you will also need assistance from professionals as you go. You simply cannot advise yourself effectively in the areas of tax planning, estate issues, insurance requirements, and in specialty investment areas such as real estate and commodity or stock trading/investing. In every possible subject in the realm of finance, there will be those who have gone before you and who know the ins and outs. Always take advantage of professional expertise when you can, whether it is paid by the hour (asking a lawyer to look over a contract or advise you as to how best to proceed in a certain circumstance), or by the lucnh date (taking a financial mentor out to discuss your plans and ask for friendly advice from someone who’s ‘been there’). You will always, without question, make your own decisions, but having a great team to back you up will give you the extra confidence - and good advice - you need to ensure your success.

LINKS TO ARTICLES YOU MAY ENJOY

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The Financial Crisis - Tools and Resources