Personal Finance Basics

When I say the words “personal finance,” what comes to mind? Is this a subject you a well-versed in, or do you feel like you could use a “refresher”, so that you have more confidence in planning your financial future? In today’s video, I am going to offer my framework for thinking about personal finance and hope that you will find it useful in gaining a better understanding of this important topic.

Welcome to my personal finance framework, which features two broad categories. I use this framework to simplify personal finance and the personal financial planning process and hope that this framework works for you as well.

Category 1. Financial Asset Maximization
-Short-term Goals (less than 2 years)
Checking/Savings for ongoing cash management and bill payment
Emergency Fund

-Intermediate-term Goals (generally 2 – 5 years)
Saving for a down-payment on a home
Saving to purchase a car.

Long-term Goals (longer than 5 years, usually 10+)
College savings (529 plan)
Retirement Savings (IRAs, 401(k), 403b, 457 plan)

These goals generally involve investing and wealth accumulation as well as making plans for taking financial distributions.

Category 2. Financial Liability Minimization

Personal Insurance
Please view "Personal Insurance - 8 Common Types” video
Life, disability, LTCi, heath insurance, homeowners, renters, auto and umbrella personal liability insurance.

Estate Planning
Lat Will & Testament
Living Will
Medical POA
Durable (or financial) POA
Appoint a Guardian for Child or Children

Personal Income Taxes
Another way to help minimize your financial liability is to hire an accountant.
An accountant can prepare your personal income tax return and help you find ways to legally keep more of what you earn.
I work with an accountant and suggest you consider doing the same.

In summary, I believe personal finance can be organized into two broad categories:

Category 1. Financial Asset Maximization and
Category 2. Financial Liability Minimization

Re-watch this video a couple of times to better acquaint yourself with each category and their underlying elements.

I hope you now have a better understanding of personal finance and that you will either be inspired to learn more or that you will consider hiring someone like myself, a CFP professional, who can serve as your guide.