Friday, September 28, 2007

Divide and Conquer

The amount of financial information thrown at you every day can be overwhelming. Add to that your time constraints and other priorities – which make the task of getting ahead in the finance arena even more complicated. My strategy has been to divide and conquer the financial gameplan. The pieces include

  • Income: I start with income or revenue or money coming in. How much you earn is the starting point and impacts the rest of your financial plan. Tracking your current income closely is job #1. Exploring other income strategies is another pursuit that fits in this category – side business, passive income plays (rental), promotion etc.

  • Savings: You earn money and spend money. How much you spend dictates how much you save. This area focuses on budgeting, core spending, discretionary spending, debt management etc. You can also explore saving techniques like pay yourself first, dollar cost averaging and 401(K) investments.

  • Investing:Once you have some money set aside is when you start to ponder the question – How to make my money work for me? This leads to investing strategies and includes portfolio management, diversification techniques, index investing, Mutual Fund fee evaluation, average return objectives, investment options beyond stocks and bonds etc.

  • Learning: And finally you have to remember – it’s your money and the onus is on you make the best decisions. You will make better decision if you are better informed about the choices and implications. Before you buy a car you do ample research and due diligence. Your financial game plan also requires due diligence - read, attend seminars, listen, have financial mentors, join investing clubs …

  • There are other financial components which should be reviewed once the above items have been addressed. These items include - Taxes, Financial Tools, Insurance, Retirement Planning, Education Saving, Health Care etc. Enough advice and options are available on all these subjects – having a game plan makes financial planning a more manageable exercise.

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