Navigating your Finances

This is a guest post from Jason at Redeeming Riches. Jason has been blogging for several months now and has found his niche in talking about personal finance from a Christian view. He is a personal financial planner that brings real life experience to his thought-provoking posts to help others become better stewards of their money and finances. You can subscribe to his feeds here.

Photo by: jbenson2
Every Spring my family and I go on a weekend golf trip to kick off the new season. It’s a great time spent together with my dad and brothers playing one of our favorite sports.

This year we decided to head to an area in Michigan that we’ve never been to before. The trip was pretty easy until we got closer to the course.

Thankfully, my brother had his GPS for direction. There were so many turns and back roads we had to take to finally arrive, I’m not sure how anyone could find this course without step by step directions.

There’s no doubt we would’ve been lost had it not been for the robotic voice telling us where to go.

Managing your finances can be a similar experience. For many people, getting your financial house in order is unfamiliar territory. Rather than “winging it”, it’s time to get GPS for your finances.
The Global Positioning System, or GPS, has become extremely popular in recent years. From golf courses to automakers and everyone in between there has been a rush to use GPS to help find direction, measure distance and get you where you need to be with great accuracy. The GPS system can be a great tool to help find your way especially when you’re going through unchartered waters.

Benefits of GPS

The GPS system provides accurate location and time information for anyone with a GPS receiver. Trying to simply read a map on the way to the golf course that weekend would’ve gotten us heading in the right general direction, but we had a specific goal in mind of where we wanted to be. GPS took us straight to that destination, the end goal that we had in mind.
The beauty of the GPS system is that you start with your current location, type in your destination and it will tell you how to get from point A to point B.

Current LocationWhere Are You Now?

The first step with GPS is to type in your location. This is your starting point. With your finances it is imperative that you know what your starting point is. I’m constantly amazed at how many people are simply unaware of where they currently stand financially. What’s the best way to get your current location?

Assess Your Situation

The best way to do this is with a little bit of work up front. Listing out all of your assets and all of your liabilities will help determine your net worth. Also, listing out all of your income sources as well as each monthly expense item is a necessary step in determining location.
Expenses is usually where many people have difficulty. They are just usnure of how much they spend on a monthly basis. This is where a diary of expenses comes in to play. Write down every expense item for a month or two to get a good idea of what is flowing out each month.

Prepare a Budget

Making a budget doesn’t have to be a drudgery. Don’t think of a budget as a lack of freedom because what you’ll find is that you are actually more free to spend, save and give once you have the right budget in place. These steps will give you the right reference point to begin your journey.

Destination – Where Are You Going?

Picking the destination is the fun part. Where do you want to go on your journey? You may want to spend some time thinking about what types of things you’d like to accomplish. How is this done?

List Goals

Maybe you want to be debt free in two years or you’d like to start maxing out a Roth IRA. Of course, there’s always been that vacation to Hawaii your wife has dreamed about. List out the goals you’d like to reach and when you’d like to reach them.

Set Priorities

You might really want that new fully loaded BMW you’ve had your eye on for a while, but you’re up to your eyeballs in credit card debt. Obviously, you’ll want to knock that debt out before you start buying the fun stuff, but the point is that you need to be clear with what your priorities are financially. Otherwise you run the risk of getting sidetracked way too easily.

Direction – How Do I Get There

Developing a plan is key to reaching your goals. GPS plots out your course and direction for you. The plan helps determine how you will reach the objectives you have set for yourself financially. The plan should list your goals, when you’d like to reach them and what action you will take to get there. Getting step by step direction is key to reaching those goals. This can be done by:

Reading Personal Finance Blogs

There are many great Personal Finance blogs to choose from out in the blogosphere. Find a few that you like and keep up to date by subscribing to them. If you haven’t already, I highly suggest you subscribe to Suburban Dollar. Kyle provides useful information in a fun and interesting format. You can also follow many of these same PF bloggers on Twitter. Here is Debt Hawk’s list of the top 100 Personal Finance Bloggers on Twitter.

Personal Finance News Sites

There are some great sites like CNN Money and MSN’s Money Central that have a wealth of information on Personal Finance. Sift through the articles to help keep you on track.

Professional Help

If you are not a “do-it-yourselfer”, then you may want to seek out the advice of a professional. There are a lot of good financial planner’s out there who will help keep you on the right track. If you’re not sure what to look for in a financial planner, the CFP Board has a good article on How to Choose a Planner.

Accountability

This is a vital area that is often overlooked. In order to effectively change bad habits or past financial mistakes we need people rallying around us to help keep us motivated and moving in the right direction. Find some close friends whom you can confide in and share your goals and desires and ask them to hold you accountable to those goals.

What About You?
GPS can be a great tool for arriving at your destination. What are some things you’ve done to effectively navigate your finances?

{ 2 comments… read them below or add one }

1 5 Girls Ditching Debt September 16, 2009 at 6:17 pm

I found Dave Ramsey’s 7 Baby Steps to be very helpfull in setting my financial destinations. To get insight on direction I learned alot form Financial Peace Univeristy (www.daveramsey.com/fpu) and reading PF blogs.

7 Baby Steps
1. Build small emergency fund ($1000)
2. Pay off debt using debt snowball
3. Build large emergency fund ($12k-$15k for single person)
4. Maximize retirement (401K & Roth IRA)
5. College Fund (going to set some money aside for nieces)
6. Pay off the home mortgage (I don’t have a house so I will save a down payment)
7. Build wealth

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2 Daniel Andrews September 25, 2009 at 7:22 am

I fully agree with 5 Girls Ditching Debt and also found Dave Ramsey’s 7 Baby Steps very helpful for myself. Great post.

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