If you made it this far, good for you! But if you chose to skip ahead and get right to this section of the book I can’t really blame you—everyone always wants to get the ball rolling right away. That said, it is important that you have a solid understanding of the concepts and ideas we discussed in the first part of our book; these form the foundation of your personal financial plan. This section of our book focuses on actual plans and action-oriented steps that will enable you to effect the different types of change and progress that you both want and need in your personal finances. While the ideas and concepts listed here are no means proprietary in nature or the result of any sort of secret sauce, these are real-world resources and tools that you can use to improve your financial life starting today.
My goal, in writing this book, is to leverage my personal expertise and experience as a CPA and advocate for financial literacy to help provide guidelines, key points to keep in mind, and a roadmap for how you can start improving your financial literacy. The first five chapters of this book focused on introducing and discussing the topics essential to designing and putting into practice a financial literacy and wellness plan that best suits your unique circumstances. These ideas, including but not limited to the following, are the items that must be incorporate into how you are planning your personal finances:
1. Credit score
2. Planning for life events
3. Your career arc
4. Saving for retirement (yes, even if it is a long way off)
5. Understanding the tools and resources that are available to you
For the rest of Part I, however, we focus on action-oriented steps and tools that you can put to work today in order to improve your financial well-being. The best laid plans and idea, without action, will not get you the results you desire and deserve.
Building Your Plan
The most important part of your personal financial plan is not any specific tool, idea, or piece of information—it is you! I cannot stress this point enough, and that is that you alone are responsible for your financial future, but that is not a bad thing. If you truly think about it—who could possibly be more concerned with your financial wellbeing and health than you? Fortunately, it is easier than ever before to organize your finances, get your financial inflows and outflows in order, and set yourself up for financial success—that should be a long-term goal regardless of what specific field you work within. What follows below should be viewed as a general overview of the steps to take to build out a personal budget and financial plan, but obviously every individual will approach personal finances slightly differently.
1. Organize your inflows and outflows—What I mean by this is that you will actually have to sit down and look at when your bills come in versus when you are paid.
a. This exercise reinforces the difference between net income and cash flow, which is critically important. Net income, for example, might be thought of as how much you earn during the month based on your paychecks. Cash flow, conversely, is focused on actually when you are paid. A big difference!
2. Plan out the goal you are aiming to achieve, in the short-term, medium-term, and long-term, and make sure that your savings plans are aligned with your goals. Setting up a budget, and dividing out your budget into these different buckets is a powerful way to help focus your actions. In addition to dividing your budget (plan) into short-term and long-term goals, there are several additional steps that should be taken in order to make sure you accomplish your goals.
a. Leverage your resources—Whether it is your friend, roommate, significant other, or a friend from work that you have discussed this with, it is important that you make the most of the people and information
b. Take advantage of technology—As we are going to cover in the following section it is easier than ever before to make sure that your saving and budgeting are staying on track. Think of it like this—if you have time to check your Facebook and Instagram during the day then you can probably carve out a few minutes to also monitor your personal finances.
3. Leverage Technology—It is almost cliché to say that you should leverage technology to help achieve your goals in the current environment, with everyone and every media story talking up the virtues of social media. That is not what we are talking about with regards to your personal budgeting and financial wellness. Technology is a great tool that provides large amounts of flexibility with regards to monitoring and planning out your finances, but it should be approached in two general ways.
a. It is mobile? With the proliferation of tablets and mobile devices, regardless of operating system (Android vs iOS), there are almost an unlimited number of apps and games available on mobile devices. With Pokemon-Go, Mario, and other augmented reality games making their presence felt on social media, the trend toward social information is clear. Any tool that you choose to use, if it is indeed accessible on your mobile devices, should also be just as good on your tablet and phone as it is on a desktop.
b. Protection—We do not have to go over again the pitfalls involved with putting your information online, as organizations continue to fall victim to hacking and data breach events. Regardless of which tool you choose to use it is imperative that you follow the following steps:
i. Only access information on a secure network (not at your neighborhood Starbucks)
ii. Change your password regularly
iii. Ensure your physical privacy whenever you access this data
Use the Resources
The saying goes that no person is an island, and this should absolutely be applied to the building and implementation of a personal financial plan, especially when it comes to the information that is used to put your ideas into practice. While there are a lot of websites and books out there extolling different plans and strategies, there are several key ideas and themes that you should always keep in mind when doing your own research. Especially since this topic has to do with your hard-earned money, saving, and investing strategies, it is especially important to use the best information available.
1. Is there a sales pitch involved with the information, and I don’t just mean a book or lecture event? In a capitalist economy, it is perfectly reasonable to expect individuals to deliver certain amounts of information up front, and receive compensation for the remainder of this information. That said, if there is an investing system or strategy that is linked to the advice, that is, if the tips and suggestions are only attached to one system of product it might be worth a second look.
2. Is the quality of this information verified by professionals and experts who are knowledgeable about the subject area? Personal finance advice and information can, and is, offered by a wide ranging number of individuals, but not all information is created equal. CPAs, certified financial planners, financial planning specialists, and individuals who have received training in the areas of personal finance and finance in general should be the go-to sources of information. Think of it like this—would you take your car to a mechanic that was not trained or certified in the field of fixing cars and trucks?
3. What format is the information presented and updated with? Basically, and this question is increasingly more and more important in an environment where almost everything is available on tablet devices and smartphones, is whether or not this information is updated as situations change. Changes in the following areas happen at a head-spinning pace, and if your personal finances, including insurance and budgeting, do not keep up with these changes, it can be awfully difficult to keep your plan on track. Some of these areas that change rapidly include, but are not limited to, the following:
a. Insurance policies
b. Tax laws and regulations
c. Health care, including deductions and premium payments
d. Mobile options for payments
e. Password policies and best practices
4. Can you construct a template or a plan? The first step in improving your personal finances and financial wellness is to put together a plan to do so, but the format of your plan is less important than the fact that you have one. It can be put together with a pen and paper, a tablet friendly program such as Mint, or any one of the other numerous options out there. A listing of resources and options will be provided toward the end of this book, but do not let the technology overwhelm you—technology is just a tool and not the end all be all of personal finance.
One of the best resources, created, monitored, and vetted by CPAs is the 360 degrees of financial literacy website. Supported the AICPA, this website provides calculators, resources, and information that can be put to good use right away. We will be taking a deep dive into the tools and resources available on this site below, but before that I do want to once again emphasize the importance of using objective information. Additionally, there are several categories of tools that should be focused on as you review the different types of information, regardless of whether they are from AICPA sources or other sources of information.
1. Calculators—Obviously the most logical benefit of using calculator tools is to actually see how your inflows and outflows work into a budget plan or template. In addition to being able to input your actual information and see how it plays out, the very process of building a budget and forecasting your financial position helps you better understand just where you are.
2. Q&A forums—As I have stressed throughout this book, it is especially important to seek out the advice of individuals that are qualified to give advice about personal finance and financial literacy. Q&A forums provide an opportunity to see what other people are asking (and give you the answer without having to ask the question yourself), and the response from experts! These forums are a treasure trove of information, and should certainly be utilized.
3. Hot topic areas—Student loans, credit scores and ratings, saving (both for retirement and for other short to medium term goals), deciding what to do about taxes and health care, and information about credits and other financing available are all extremely important. Hyperlinks in this text provide you access to do pamphlets and brochures about tax credits, and how to better offset the costs of college. Paying attention to developments in these areas of importance form the foundation of any solid personal financial plan.
While there are many other sources of financial information, specifically personal finance data that are available in the marketplace such as Dave Ramsey, Suze Orman, and even Tony Robbins, we are going to drill down deep into two other resources. While these individuals and books contain a large amount of quality advice and resources in these books, the resources I am going to be discussing are provided by the AICPA. The information may, in fact, by similar in nature, but again my goal is to provide you with high-quality data that are freely available, and are also accessible online.
360 Degrees of Financial Literacy
As a member of the AICPA’s Commission on Financial Literacy you might say that I am little bit subjective in my praise of both the initiative and the resources available, but you can certainly review them and make your own decision. An initiative that really began to pick up steam following the financial crisis, the Commission on Financial Literacy focuses on delivering high quality information to individuals so that they can make better decisions. Information delivered both through the website, social media campaigns (Facebook, Twitter, and Instagram), and by utilizing commission members as experts to speak to press, the commission serves an important role. Drilling down in both the 360 Degrees of Financial Literacy Website, and the Benjamin Banks “Feed The Pig” campaign there are areas that can provide foundational elements of any personal financial plan.
First, the websites themselves
360 Degrees of Financial Literacy http://360financialliteracy.org/
Benjamin Banks—Feed The Pig http://feedthepig.org/
360 Degrees of Financial Literacy
The 360 Financial Literacy website is a virtual treasure of information related to personal finance, financial planning, and calculating how to better save for goals throughout your personal life. Several of the most useful data points and resources, in my opinion, link back to the areas listed before to look out for when looking for high-quality resources. One additional resource and tool that comes in handy, mirrors the convenience of other online platforms and resources, and should definitely be used, is the ability of individuals to log-in and create their own accounts. While this might seem like a relatively basic feature or functionality for a website to have, the ability to customize your preferences the data that you will get is customized for you and you alone. Also, and on top of the ability to log-in and set up your preferences, the 360 Financial Literacy website also provides the opportunity for individuals to sign up for e-mail alerts and information as you request it. On top of that, and presented right on the home page, is one of the most versatile features of the site itself—depending on what stage in life you are at, or planning for, there are different resources available for you to use! This acknowledges something that all of us already know—that depending on where you are in your personal and financial life your goals and objectives will be different.
These are great features, and they are complemented by the fact that the 360 Financial Literacy resources also have a powerful presence on social media platforms, especially Facebook and Twitter. To be honest, more and more people, especially millennials and Generation-Z (the age bracket following the millennials) are likely to get information and hear about things either on Facebook (or via Instagram depending), or Twitter. Having a presence on these platforms reinforces the accessibility of the information presented on 360 Financial Literacy website. Again, and this point cannot be stressed enough, is that the information provided on this website is sourced and vetted by CPAs and certified financial planning professionals. In contrast to other informational sources there are no sales pitches or pushing of a specific product or service, which enhances the objectivity of the advice and information provided.
The somewhat humorous name and icon bely a great resource of information that plays particularly well, and is oriented toward younger professionals and younger people seeking realistic advice specific to their situations. Again, one of the best features available on this site includes different menu options that focus on different areas of your personal financial life such as buying a car, paying for college, or purchasing your first home. Breaking out these different goals, which usually correspond to different stages in an individual’s life, is an asset to the individuals seeking to leverage this information.
Customizing content, especially for millennials, young professionals, and people looking for information relevant to their specific situation makes this resource more appealing user friendly. In addition to these features, the Bank On It game, created in coordination between the AICPA and the Ad Council, creates an environment of gamification for learning about financial literacy. As the trend toward gamification continues to become increasingly relevant in education at large, the financial literacy subset of education is no exception. With thousands of participants, including international participants, the enthusiastic response to this feature will only drive further improvements.