Financial Services
Build Wealth with a Powerful Personal Financial Plan
Accounting for your own personal finances is the first step toward building lasting wealth. It is essential to know the amount of your Owner's Equity before you can start to develop a good financial plan.
Once you know what your assets are, and you know what your liabilities are, then you can calculate your Owner's Equity. Then you can develop a financial plan to reduce your debt and achieve your financial goals.
Here is the Generally Accepted Accounting Principles (GAAP) accounting equation:
Assets = Liabilities + Owner's Equity
Let's start with the right side of the equation. First, you must calculate the amount of your outstanding liabilities. This means you write down in a list exactly how much you owe right now on your mortgage, credit cards, and any other bills or loans.
Next, let's go back over to the left side of the equation where the assets are. Make a list of every asset you own. Examples would be your cars, home and cash you have in the bank. List all of your major assets.
Now we will determine your Owner's Equity. Simply use this variation of the preceding equation to arrive at your present Owner's Equity (how much you really own):
Assets - Liabilities = Owner's Equity
If you want to increase your Owner's Equity you must pay down your liabilities and avoid borrowing more money to buy more assets. Responsible saving, investing and proper paying down of your debts is crucial to your financial success.
Most experts agree that you need to allocate money every month for all these areas of your financial plan. It is not enough to just save some money in the bank. Because if you are carrying a credit card balance at the same time, you are losing all the benefits of the interest coming from your savings account.
Here is an example of a good financial plan:
1. Take the money that you are presently putting in your savings account every month or investing in other places and divide the total amount by 3.
Then,
2. Pay down your outstanding debts with one third of this money every month.
3. Take one third of this monthly allocation and simply place it in your savings account at your bank. This will be the pool of money you can use to balance out your monthly needs. As this money grows over time you can use it to finance your family's future needs or apply it to the goals of your financial plan.
4. Use another one third of this money and buy 1-5 year Certificates of Deposit. It is best to save up enough money to buy a CD of $1000.00 every time you invest. A good rule of thumb is to buy one CD every three months to six months. Remember to keep enough cash in your checking and passbook savings for any emergency.
By adhering to these tips you will pay off your liabilities in a timely manner. When you invest in 1-5 year CDs you will be earning interest and compounding your money by purchasing more CDs at specific intervals.
The biggest roadblock to financial success is accumulating a large credit card debt and not paying it off as fast as possible.
It is also recommended that when you have enough money saved up in your regular savings account, you begin to accelerate your mortgage payments every month. Check with your mortgage lender to see if your mortgage allows you to pay more per month than your regular payment. If so, start to pay more every month on your mortgage than you are required to. You will build equity in your home faster, save on interest charges and retire the mortgage much sooner.
By using a proven financial strategy such as this one you can reduce your debt faster, and build wealth for your family quickly. The above steps are by no means the only way to build wealth. These principles are basic and necessary though. Your family can be on the way to a brighter financial future when you prioritize your spending, saving and investing habits. After all, it's your money; why not put it to its best use!
We hope the following financial services resources will be of benefit to you.
Financial Services Resources
- Home Equity Loans Refinance with bad credit
- Find the best programs for home equity loans and programs to refinance your loans. Available for people with any credit.
- Computer Financing
- Computer Financing Laptop Financing. Get credit repair at Finance My PC. Come visit our site and get started today.
- Cash Advance Loans
- Online Loan Resources, personal Loans of all types, payday cash advance lenders. Click here for immediate funding
Propose to add your site.
Credit / Debt Management
Can a Prepaid Credit Card Help Your Credit Score?
You may have heard about prepaid credit cards as an alternative to real credit cards, especially if you have bad credit or no credit at all. The truth is, prepaid...
Keep Your Credit Card Information Safe
Not all credit card thieves are technical enough to hack into retail store computer systems to steal your information. Some still do it the old-fashioned way, e.g. stealing your wallet...
Households Owe $8200 in Credit Card Debt
People didn't use their stimulus checks to pay off credit card debt, says Kimberly Amadeo, About.com's Guide to U.S. Economy. This month's Consumer Credit Statistical Release, published by the Federal...
41 Million Credit and Debit Card Numbers Stolen
Eleven people were recently indicted on multiple charges of fraud and identity theft after stealing more than 41 million credit and debit card numbers, according to Associated Press. The...
Is Debt Making You Sick?
Of course, most people in debt are "sick and tired" of being in debt. I mean is debt literally making you sick? It might be. A recent...
FICO Will Keep Authorized User Accounts
Fair Isaac has changed its mind about removing piggybacked accounts from the FICO score equation. In 2007, Fair Isaac announced a new credit scoring model - FICO 08 - that...
How to Get out of a Crunch Without a Payday Loan
Payday loans have earned a terrible reputation for getting consumers deep into a debt trap that's nearly impossible to get out of. You'd think a payday loan is easy...
Comment on the Unfair Credit Card Practices Rules Proposed By Feds
In May, the Federal Reserve proposed new credit card rules that would eliminate several unfair practices in the credit and banking industry. You can comment on the news at...
Copyright © 2007 Robert Sherman
|