Developing good money habits
“Money can’t buy you happiness.”
“There’s a lot more to life than just money.”
“Money isn’t everything and can cause a lot of pain and suffering.”
You’ve probably heard these common sayings before, but despite the truth in these sayings, it’s also important to recognize that money is very important because it is part of everyone’s life.
Money is a tool
Money on its own is neither good nor bad. It is a tool that enables you to protect you and your family. Money helps you to create a life. Money allows you to help others and give back to your community. Money helps you to survive by simply putting food on the table, a roof over your head and clothes to keep you warm. Money may not be everything, but it is important. Financial planning can help people recognize that good financial habits can go a long way toward reducing stress in our lives.
Financial stress is all too common in our society and we need to do something about it. The starting point is a little knowledge, but true success comes from action. It comes from taking control of your financial affairs and developing good financial habits.
What is financial planning?
Financial planning is a very broad, generic term that can mean different things to different people. For some, financial planning is associated with financial products like mutual funds or life insurance. For others, financial planning is simply about getting ahead financially.
If you Google “Financial Planning,” you will find a lot of attempts at explaining what financial planning is. Despite the fact that there is no shortage of information about what financial planning is or should be, it is still confusing to many people.
Let’s break down the words. The word ‘planning’ means looking into the future to make the future as predictable as possible. That’s all plans are . . . a road map or game plan or framework for the future. Add in the word ‘financial’ and a financial plan is simply a look into your financial future to ensure that you are implementing the right financial strategies to get ahead financially.
Maybe one of the best approaches to understanding financial planning is to define what financial planning is not.
Financial planning is NOT:
- a two-page document you get after spending 15 minutes with someone at the bank telling you to save more money.
- just about buying mutual funds or other investments to save money for the future.
- buying insurance policies as the solution for risk management
- sitting with an accountant to figure out how to reduce your taxes each year.
Developing good financial habits
Financial planning is simply about trying to develop and implement good, sound, healthy financial habits for the future.
Far too often we are lured by the thought that there may be a shortcut to wealth. We all dream about winning the lottery, or investing in the next great investment, or starting a wonder business that becomes a license to print money. Our society is filled with schemes to go from rags to riches in less time than you think. If it is really so easy, why is 80% of the wealth in Canada in the hands of 20% of the people? What are these 20% doing right to accumulate the majority of the wealth in Canada?
Wealth accumulation is simple, not easy
Financial success is actually quite simple and you probably already know everything you need to know to make it happen:
· spend less than you make
· pay yourself first
· get out of debt
· live within your means
· don’t ignore your investments
· put your money into appreciating assets as opposed depreciating ones
As simple as it may be, the challenge is that it’s not easy. Why? Because it takes work, effort, awareness, discipline and change. This resource is designed to help you to look into your future and make you aware of some of the financial areas you can address so you can develop sound financial habits.
Hi Jim – These are some very good points about financial planning. My biggest concern is how most financial sales people will call themselves a financial planner just to sell a product and are too lazy to do the work of preparing a proper financial plan. I wrote an e-book about financial planning that anyone can download for free here: http://info.frankwiginton.com/free-e-book-on-financial-planning/
Jim you did a review of this ebook as well: http://groupbenefitsonline.ca/what-financial-planning-is-not/
Maybe with the bigger push on financial literacy we will see more emphasis on the use of the term financial planning. Here is hoping!
Saving and investing your money is very important. Make your money work for you. You should save more than 20% of your income.
I enjoyed this article, especially the part about wealth accumulation being simple but not easy. Those five bullet points make up a succinct and simple list that folks can use to get started. Thanks for another great post.