Personal Finances 101

I can’t help but think of my buddy living in a mansion atop an exclusive hill, in an exclusive community, driveway littered with fancy cars, 100’s of antiques, vacations @ $3,000 a night, and when we go to the store together, play golf, or hit the gas station I end up paying because he never has any cash. His personal finances are a house of cards yet he is the envy of everyone I know, except me of course. If he makes 10 million dollars and spends 10 million and one dollars he’s broke.

Determining one’s net worth  and balancing ones lifetime checkbook are keys to proper financial preparation for retirement. Below is an example of how one can easily determine one’s net worth. I recommend the retirement calculator on MSN’s website. Or Google net worth and you’ll see dozens offered for free, just be aware they’ll likely try to sell you some investment products if you let them.

Example:

Net Worth Calculator Estimated Net Worth:$167,180

Assets, Liabilities, Personal Items, Estimated Value, Loan Balances, Estimated Value Home

$240,000 Mortgage loan$ 200,000 Vehicles24,000 Home equity loan-Jewelry 2,300 Car loans 14,000 Artwork1, 400 Real estate loans, Furniture 6,500 Student loans-Electronics 3,000 Other loans  – Other Outstanding Debt Other- Credit card debt$ 9,000 Cash or Cash Equivalent,  Other debt? Checking account$ 1,200  Savings account 780   Certificates of deposit-   Money market account-   Life insurance (cash value)-   Other– Investments    Retirement account$ 21,000   Bonds-   Mutual funds 5,000   Individual stock shares 10,000   Real estate other than home 75,000   Other?

Assets Total$ 390,180

Liabilities Total$ 223,000

Estimated Net Worth: $167,180

Now in this example we see a net worth of 167,180. If after using one of the many calculators out there one sees their net worth as less than desired one can look closely at how to increase it.

Here are few ideas:

  1. Really see what you really spend, what you really owe.
  2. Place more emphasis in your life on doing stuff instead of buying stuff.
  3. Expect the unexpected.
  4. Pay with cash.
  5. Bring restaurant food home.
  6. Have an older, but nice used car – that’s paid off.
  7. Mow your own lawn.
  8. Balance your lifetime checkbook today.
  9. Err on the side of caution no matter how much money you make.

Be conservative with money and be proud of it!

    1. Increase annual income by 10% every year.
    2. Baton down the hatches on your personal financial ship.
    3. Write out your budget with your financial partner and reduce expenses.

 

  1. Establish your recession backup fund.
  2. Attack and eliminate your non-mortgage debt. Get into and stay in a fifteen-year mortgage or a home ownership accelerator mortgage until you pay it off.
  3. Invest smart and save 10-20% of monthly income for retirement.
  4. Find your Passion.
  5. Perform creative work for compensation or not.
  6. Develop frugal faucets for retirement.

Balancing your lifetime checkbook means you have a date identified when you will kiss your debt good-bye. Credit card debt, automobile debt, student loans, personal loans etc. are to be paid off on such and such date and here are the steps I’ll take to make it happen. Hopefully this date is at least 10 years before you retire. All the money you spent on these debts can be applied to ones mortgage with the idea that it will be paid off before retiring. It is also important in the event one’s nest egg is smaller than needed to get extra aggressive with building one’s nest egg in the 10 years leading up to one’s retirement date.

We all know that famous expression,” time is money.” For future retirees time is a very valuable asset. Proper Planning ensures one takes full advantage of the time one has to develop one’s nest egg. Future retirees will always benefit from seeing things as they really are sooner rather than later.

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About Roger O'Keefe

My background is in education and finance. I'm a published author and photographer, former radio talk show host, and creative retirement planning expert. My work is a love of labor, I do not sell any products of any kind. I've appeared as a guest on more than 50 national and local television and radio shows. With a Masters in education, I'm a licensed educator and author of the “Future Bright Program” and the California State Department of Education “Teacher Appreciation Program.” I'm a member of the American Association of Retired Persons and the National Care Planning Council NCPC. I'm currently writing my second book and reside in the Rocky Mountains of Colorado. My mission is to reshape retirement planning one person at a time. Please visit my website www.creativeretirementplanning.net and take advantage of the many complimentary online seminars, resources, and retirement planning tools.
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