Useful/Useless Personal Financial Planning Strategies!

[ghm]

All,

What Personal Finance/Financial Planning has been very useful for you and which one have you used that you wish you never use?

I think financial freedom starts form this salient topic. Please Share your experience.

[Davy Dany]

Even i am looking for some advice in this...

Looking forward to get many replies

[blackgeneral]

1. I religiously write a monthly budget for myself, listing out my income, giving, saving, expenses on food, rent, transport etc

2. I make sure my savings is at least 10% of what i earn

3. At the end of the month, i review my expenses to see if they are in line with my estimates. (I usually note down my major expenses so i know what they are on. My expenses are usually made with my debit card, so a look at my bank statement tells me what they are on)

4. Reviewing my expenses at the end of the month helps me write a better budget for the next month.

5. I am currently building up my savings to a certain limit. This is what I call 'emergency money'. This is money that will sit in my high interest savings account which i wouldnt touch. I'll keep building up this emergency money until its up to my salary for 2 months and I wouldnt touch it. It is for emergency like, God forbid, one looses his/her job, or their is a major medical expense etc

6. Any money i save above this my 'emergency money' will become my investment money. My investment philosopjy is that 70% of my investment will be in real estate and 30% in stocks, cos i really believe in real estate.

7. I have investment goals - how much i am hoping to earn if i invest so and so amount in so and so investment vehicle (stocks, real estate etc)

8. I try to run away from debt of any kind (loans, credit cards etc). The only debt i will consider is for one to buy a good investement, e.g a mortgage

9. I only lend people money i can afford to loose. That is, if it happens that they do not pay me back, i can bear it and it wouldnt touch my savings or investment. Cos my saving and investments are 'holy'

10. I have set a date for when i hope to become financially independent - that is, I can live comfortably from the money my investments bring in (i.e passive income), wheter i am paid a salary or not.

11. I am currently building other sources of income - small businesses i run by the side, which give me experience in how to run a business, and also help me earn money.

[blackgeneral]

i am not married, but if i were, me and my wife will do the budget together every month so that we both understand where the money is coming and where its going. This helps communication among couples

[blackgeneral]

Another thing i forgot - insurance. I dont do this much, but its wise to insure any property you own that is of high value - your house, car, etc

[ibik_imam]

Hi, I do all my brother does on budgeting but instead of putting money in savings account, I buy stock with it. I leave very little money in my savings because I found out that something always goes wrong and I have to dip into my savings.

So I try to make sure my emergency(s) don't normally need ready cash as this gives me time to think and plan. I also try never to carry cash except for a specific purpose as I always find out that some thing usually catches my eye to spend it on.

I also have emergency money included in my monthly budget approximately 10k, which i put in my savings or stock portfolio at the end of the month.

Hope this helps

[ghm]

Thanks for taking the time to share all these; these are fantastic methods. I wish I can implement the 12 points in my finances successfully. I wouldn't have got my fingers burnt a couple of times.

However, I think one also need to know oneself: your weakness and strength towards money to be able to effectively decide your own methods which will work very well for you.

I have tried similar methods and does not seem to work for too long because of my weaknesses with money.

What do you recommend for someone who is not so good with keeping money and records?

[Stockbear]

I am self-employed, hence owing to fluctuations in my income I find it hard to budget. Prior to discovering the stock market I would just save and spend. (I love buying shoes and clothes) but since discovering the stock market, I ususally tend to put money aside as it comes to me, considering my goal to trade the market.

What I am trying to say is that if you have a goal similar to mine,this might provide the discipline you require to put any "loose" money aside for investing.

Hope this helps.

[Tayo]

The major thing you need to have is determination.
Here are some points I follow.
1. Have a good reason why you want to be financially free. Think about all those things you need to do but can't do due to time and/or money.
2. Then plan a time frame for when you want to achieve this. It could also help to calculate how much you would have made if you had started investing 10 years ago. With these in mind, anytime you want to dip into your savings or investments, you'll remember that you are also postponing your financial freedom by a couple more years.
3. The next thing is consistency. Try to set aside 10% of your income with which you'll invest. If 10% is too much, set aside an amount you're comfortable with. Be consistent. You can go above your planned amount but never go below it. If for some reason you go below, don't worry. Forget about it and make sure it doesn't happen again.
Remain consistent.
4. Have a strategy. Personally, I want to limit all my investments to stocks, bonds and mutual funds. I've not reasearched other avenues yet and until I do, I'm not going there. I suggest you stay only within limits you're familiar with. Also, don't over diversify. It could become a full time job to monitor all your investments.
5. Compound your returns. Don't spend the returns on your investment. Re-invest them so your money keeps working for you.

These are the points I can put together for now. I'll post more when I can

[bwalaman]

I work on percentages- invest 10%, save 10% and 10% available for monthly emergencies. Saving and investments are minimum, so they can be increased.

Use the various "fixed deposit" saving tool available in most banks- interest rate is about 10%!!! And it compounds as well...

The NSE is basically a cyclical market with most shares picking around AGM time and dropping around the xmas/new year time- so buy smart.

Buy IPOs, usually comes in discounted and perfect to pick up short term gains.

Don't buy emotionally- I bought into a share in 2003 that has lost about 45% of its value.

Buy privatized company through IPOs!!! These are hiden treasures (the BPE web page will have this info).

Periodically sell out of the market and add to fixed deposit...

When land comes across you (note, you did not go looking for it) buy it...it is already under valued and land appreciates well.

...live below your means. Learn to differentiate between need and desire (common sense, but desires drains cash)

Communication with wife, very important- be on the same page.

What do you think?

[blackgeneral]

bwalaman, that is just fantastic advice. Thank you so much. I can see my pocket + bank account swelling already

[cmi]

Originally Posted by ghm

All,

What Personal Finance/Financial Planning has been very useful for you and which one have you used that you wish you never use?

I think financial freedom starts form this salient topic. Please Share your experience.

While subscribing to most of the comments by astute members, I will also add that you go over your budget and find ways to reduce some of your outgoings. This can be done, for example, when you are about to renew a contract with organisations or suppliers you deal with. Always shop around for better options. Negotiate with companies or organizations you patronize or are loyal to. You can always switch if they want to play hardball.

Request a discount from your insurance (car, home, valuables, etc.) coy if you don't make a claim in a year.

Make sure you understand what that fee on your bank statement is all about - don't take their word as d holy grail. Imagine N50 (fifty naira) multiplied by all the customers of one bank, for instance. Don't be counted as one of those taken for a ride - d gullibles.

Try to buy your things in bulk - try a mini-cooperative with your friends. The so-called masses spend more money than the big man/lady if you consider that Mr. Masses buys in units e.g. cups of garri or sachet of detergent, while Mrs. Big WoMan will buy in sacks.

My ancestors say "kobo kobo ni owo Ijebu" meaning a trickle of water can make an ocean!

My smalls contributed - let's keep educating us!

[ghm]

This method is what I can described as Reverse savings (applicable for those who have access to credit facilities; staff cooperatives etc and are in regular paid jobs).

What I do most time is that I borrowed money for over a reasonable period, (6 months to 2 years) at moderate interest rates and use it for my investment or project finance and then pay it back from my take home.

This keep cash away from me and thus reduce emotional and sensational spendings. It has worked so much for me and thought I should share it too.

I described it as reverse savings because for savings: you put money aside and invest it or use it for a project but these case, you borrow to invest and then pay back regularly as agreed.

[dotunk]

men!

i really envy this list of yours to the extent i thik you are not a real person. how can you ahve so much rules? i agree one needs to do all those things but they dont sound humane. in fact i think its too perfect a list... or ideal and you and i know there aint no ideal situation.

but men, i think say i go just write thelist down and see which ones i go fit do.

[dotunk]

Originally Posted by ghm

This method is what I can described as Reverse savings (applicable for those who have access to credit facilities; staff cooperatives etc and are in regular paid jobs).

What I do most time is that I borrowed money for over a reasonable period, (6 months to 2 years) at moderate interest rates and use it for my investment or project finance and then pay it back from my take home.

This keep cash away from me and thus reduce emotional and sensational spendings. It has worked so much for me and thought I should share it too.

I described it as reverse savings because for savings: you put money aside and invest it or use it for a project but these case, you borrow to invest and then pay back regularly as agreed.

ghm,

you be my guy! Olorun! i have actually done that some months ago only that the investment has not started paying back. now i just got a facility of 1mil over 3 years and am thinking of putting 75% in investment that will yeild a modest ROI and use that to pepay the loan with no stress on my salary.

i love the term "reverse avings"


what do you consider a modest interest rate and what do you think of Nospecto, insight,up henry etc?

[Davy Dany]

There are seven factors that you need to know about in order to have an effective financial planning strategy. The professionals at Barry Financial Group can possibly lead you to your financial goals by informing you about:

1. Cash Management
2. Risk Management
3. Investment Planning
4. Tax Planning
5. Life Insurance Planning
6. Estate Planning
7. Retirement Planning

[blackgeneral]

An adviser suggested by second hand cars that are say 1 year old or less, instead of brand new ones. This effectively reduces the cost by at least 40% and you still get a great car. What do you think?

[babs]

meen, I envy u guys o. maybe because we have different responsibilities... family-work-communities and etc. I try to be very prudent in spending. I come to understand myself better as my income increases.

Housing = 60% including bills.

Transportation = 15% Car payments - repairs - fuel

Miscellaneous = 15% Gifts and personal

Savings = 10% A must for Raining day. And when reverse savings
kicked in, i used this to pay back.

Being a savy person, whatever side biz comes along, cars/housing/inv, the proceeds goes: 50% re-investment and 50% for life improvments as I have mouths that feed off me.

[eriksbmw]

Babs Hi !

Do you seriously mean that you spend 60% of your income on housing and utilities ?.......just need some clarification here cause I think thats way too much !

I'm one of those that believes that housing shouldn't be more than 15% of annual income.

[babs]

True my brother... the only difference is that the 60% is from my net-income and not gross. I told I learn as i get increased in income and age.