Tuesday, February 9, 2010

Make the Dreaded Appointment...with your Financial Planner

More daunting than the doctor, the financial planner, can give you the news you least want to hear. How your money is doing. If you want to make money and create wealth, you need to know where you stand and get yourself safe. Knowledge = Power = Wealth. You need to have your personal finances in order. Where you put your money is as important as making money. You must protect it.

Firstly, figure out your net worth so you can track it on a monthly basis. Your assets are what you own. Start with your cash and liquid assets (cash & bank accounts, bonds, term deposits and investment certificates, money owed to you), marketable assets (mutual funds, stocks, real estate investments, business interests), long-term assets (retirement savings, cash value of life insurance, pension plans & profit sharing), personal assets (personal residence, recreational property, vehicles, recreational equipment, household furnishings & equipment, collectibles). Total your assets.

Your liabilities are what you owe. Short-term debt (charge accounts & credit cards, line of credit/overdraft, loans i.e., car loan, etc., unpaid bills, taxes i.e., income tax or property tax owing, charitable pledges, family obligations, etc., Long-term debt (home mortgage, other mortgage loans). Total your liabilities.

Your net worth is the total of your assets minus total of your liabilities. How did you do? Want to do better? Good. This is square one and now that you know your net worth, you can work on what actions you need to take to create a financial plan to get you where you want to be.

Financial planning is a process that involves identifying needs and objectives, establishing priorities based on your values and implementing options. Once you have established your financial position, you can focus on risk management, wealth accumulation, tax planning, retirement planning and finally estate planning.

Prepare yourself to not lose money. Visualize how much net worth you would like to have and in how long. Create a written plan for your goals/dreams. What action steps do you need to take to move you closer to your goals/dreams? You took a big one by meeting with your financial planner. Now, make a decision, commitment, plan, preparation and execution to be successful!

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