Plan for the EXPECTED in order to simplify

future and past

We have all heard that you should have an emergency fund in place for those unexpected expenses or emergencies. It is something I believe is important if you want to simplify your personal finances. Not only do you want to plan for the unexpected you also want to plan for the expected. Yes, it sounds like common sense but you have plan for those expected events in life. By having a plan for the expected events as well as an emergency fund in place for the unexpected you will simplify your finances.

Here are some expected events that you should be planning for to simplify your finances.

Retirement – We all know we would like to retire one day. So have you started to save for your eventual retirement? Do you know how much you will need in retirement to live the lifestyle you desire? Are you contributing to a retirement plan? Do you know at what age you would like to retire and begin to make a IRA withdrawal? Planning for your eventual retirement is essential part of simplifying your personal finances. If you plan for it now its much easier to reach the goals that you set for yourself.

Death – We all know that we will eventually die one day but  just not sure when. Yes it would be much easier if we knew when it would occur but at this time we can not predict our day of death. We know we will die some day so why not plan for it now even though we are not sure what day and time it will happen. To simplify this you should have a will. SEE You probably should have life insurance for those you leave behind. If you really want to be proactive, purchase a prepaid funeral plan as well as plot for your burial. You know it will happen just not sure when so why not plan for it and simplify your finances as well as your loved ones.

Car Purchase – We know your car will not last forever. You will eventually need to purchase a new one day. So why not plan for it. Here is how you can do it. You purchase a new car and decide to finance it over 3 or 5 years. Once you pay off the car loan, instead of allocating the car payment to another expense why not continue budgeting the car payment but pay yourself. This way when it is time for a new car you would have already saved the money for the new car. Now that’s planning ahead as well as simplifying your finances.

Home Purchase -We know we will purchase a home or upgrade to another home in the future since most people don’t live in one house their entire life. Why not think ahead an plan for your future home purchase.

College Education
- We know its important for our children to get the most education as possible and also know its not cheap to send your child to college to further their education. You may hope for a scholarship but be proactive and plan for their future education needs.

So TAKE ACTION put a plan in place for those expected financial events in your life. Its better to plan for them than not plan for them. Planning for those events will help you simplify your finances.

What are some events in your life that you know will happen that you should be planning for?

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Cure for the Financially Overwhelmed

Stethoscope and dollar

Do you experience any of these symptoms when thinking about your personal finances:

  • Budget dizziness – when trying to create or even think about budgeting
  • Debt fever – when reviewing your outstanding debt and wondering how you can eliminate it
  • Sweaty emergency fund palms – when trying to determine how much is needed in your emergency fund.
  • Late fee hair pulling – when you open your account statement and see that late fee charged to your account.
  • Banking knots in your stomach – when trying to reconcile multiple account statements or trying to keep track of multiple banking relationships.
  • Retirement savings rash -when trying to determine how much you will need to retire and when you will be able to retire.

If you experience any of these symptoms when you think about your finances, I am not a doctor but I believe you have what is called financial overwhelmedness.  Financial overwhelmedness is the inability to make a decision regarding your finances because you have so many questions and not sure what decision to make.  You are afraid to make a decision because you don’t want to make the wrong one so just don’t make a decision at all.

Since I am not a medical doctor I am not able to prescribe any medication to help cure this.   But here are some tips that will help you overcome your financial overwhelmness and hopefully helps you simplify your financial life.

FOCUS ON THE THINGS YOU CAN CONTROL in your financial life.  Do not spend time worrying about things that are out of your control its a waste of your time. Deal with the things you can control.  For example, you can control how much you spend and save each month. You can control how you allocation your retirement and non-retirement assets but you can not control the stock market or the price of gold.

TAKE ONE STEP AT A TIME As I always state at the end of my post take one step at a time to simplify your personal finances.  I truly believe this.  You must take one step at a time if not you will overwhelm yourself with the information and decisions.  So instead of trying to tackle multiple financial task at a time break them down into simple task or steps to make the process less overwhelming.

ASK FOR HELP If you feeling overwhelmed ask for someone to help you.  I am sure you can someone a friend or family member who has dealt with your situation that is overwhelming you.  If not there are many personal finance bloggers who can provide you with a solution.

TAKE ACTION do not just sit there and not do anything or say to yourself I don’t know where to begin.  Even if you are overwhelmed you will have to begin at some point so why not now.  Take action by take that one step at a time as was identified earlier.  You will only be able to cure yourself by take some action even if its one tiny step.  It’s much easier to tackle one situation at a time then to try to tackle them all at once.

What are some other ways that you have overcome financial overwhelmness?

Til next time take it one step at a time to simplify your finances.

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Have you audited your personal finances?

Audit Checklist

Usually when you hear the word audit, we assume its a bad thing. But doing a financial audit can help you simplify your personal finances and may even help you save some money. I am a big proponent of simplifying your finance by automating them.   But as I wrote in Don’t Automate your Personal Finances and Forget About Them I believe you must review your accounts on a regular basis.  That’s why I propose you do a financial audit on your personal finances every so often. At a minimum every six month you should do an audit. The reason for the audit is to make sure all of the auto payments you set up are stilling being processes as you originally established and any automatic payments you discontinued or thought you discontinued have been stopped. Additionally you want to review those payments.

For example you know that gym membership you signed up for at the beginning of the year so you could lost a few pounds and get in shape. It was set up to debit your account on a monthly basis but guess what you have not step foot in the gym in over two months. Doing the audit you could catch this and cancel the membership to save some money each month. Also you know the monthly newspaper subscription you signed up for several months ago thinking you would have time to read the paper.  When was the last time you read the paper? So instead of having the monthly charge to your account you can stop it and save money. So you can see performing a financial audit is a good thing.  It will help you eliminate expenses you are no longer using as well as verify that your payments are being processed as established.

Here are the things you are looking for when completing a financial audit of your finances:

Monthly Recurring Bills or Expenses – This can be any monthly expense you have charged to your credit card or deducted from your bank account.  Review each monthly charge or debit and ask yourself am I still using this services or product. Can it be eliminated?

Monthly Service Fees – Check your account statements to see if you are charged monthly service fees or late charge. For example, are you charged monthly for banking fees. If so look to see what can be done to eliminate the charge.  Are you being charged monthly late fees? If you automate this there should not be any late fees. But you want to make sure the payments is deducted on the right date to avoid them. Due dates can change so make sure the payment is deducted on time and allow enough time for processing.  If its not it defeats the purpose of automating your finances.

TAKE ACTION by reviewing reviewing all of your  auto debits and automated charges to ensure they are set up properly as well as look to eliminate any auto debits for services you no longer are in need of.   If you are charged late fees or service review the reason for these fees and look for ways to eliminate them if possible.  This will help you save money.

Til next time take one step at a time to simplify your personal finances.

This post was featured in Carnival of Personal Finance Elvis is Dead Edition.

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Don’t hate yourself for not having a job loss plan, just do it

Budget deficit

In order to simplify your personal finances you must be prepared for the unexpected. With the current global economic state that we are currently living in, are you prepared if you lost your job tomorrow? You may not feel like your job is at risk but you never know. So have you considered how you would handle an unexpected or even expected job loss? What would you do?

Most people would answer get another job.  Unless you already have have something lined up it could take several weeks or even months to find another job.  Are you prepared to have no income for several months? 

What you really must have in place to lessen the financial impact and relieve some stress is a job loss disaster plan.  This plan would map out what you would do if you suddenly lost your job .  Its better to spend a few hours now mapping out your plan instead of several days or months wondering where your next pay check will come from.  Here are some things you want to consider when designing you job loss disaster plan:

Do I have an emergency fund in place to cover short term job loss? You should have an emergency fund built up to cover your living expenses for several months in case of possible job loss.

Is my emergency fund adequately funded in case of job loss? If you have an emergency fund in place is there enough in the fund now to cover your current living expenses for several months.

What would I do about medical insurance? If you employer supplements your current medical insurance, its important for you to know what your options are if your job is eliminated.

Where would I begin my job search? Know where you would start looking for new job if your current one is eliminated.

Do I have a current resume? Make sure your resume is current and ready to be distributed to potential employers.

What current expenses could I eliminate if necessary? Review your current expenses and identify expenses that you could eliminate.  These may be current luxuries that you can afford while employed but you may not be able to continue if faced with job loss.

Identify the minimum income I can live on each month? Review your monthly budget and determine what is the minimum about of income you will need monthly.

What other sources of income do I currently have? Do you have investment income or other ways to generate income outside of your job to help.

How much debt do I have outstanding? Knowing what you owe is important especially if your job is eliminated.  Now is a good time to work to eliminate any unnecessary debt just in case.  If you having a difficult time paying off this debt with a job just think how difficult it will be to eliminate this debt without a job.

So take action by answering these questions and begin putting your job loss disaster plan in place.  By having a disaster plan in place you will not only simplify your finances but also reduce some stress when and if a job loss occurs.  Remember its always better to be safe than sorry and to be prepared then unprepared.

Let me know what you would do if you loss your job today?

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