UNLESS you're overly confident, organizing your personal finances can cause anything from mild dread to outright panic. You're certain you need to do something to plan for your future, but you aren't always sure just what.
The one thing you do know is that most of what you'd like out of life - a roomy house, nice things, college for you or your kids and a nice retirement - seem hopelessly expensive. It's that pit-in-the-stomach feeling that so many stock brokers and financial planners feed on.
Well, it doesn't have to be that way. Investing can be as simple or as complicated as you want it to be. It's true that you need to get organized. And it pays to get started as soon as you can. But, at the end of the day, it doesn't have to be all that difficult. After all, plenty of people have nice things, go to college and retire comfortably.
What you need are a few tools, some advice and a system that allows you to spend as much time on your investments as you see fit. These five steps will get you there.
Step One — Basic Training
At this level, we assume you're familiar with the basics of stocks, bonds and mutual funds and that you understand the fundamentals of risk management. If not, we'd recommend you visit our Investing 101 section, which will give you a strong foundation in how markets and investments work.
Step Two — Measuring the Status Quo
How much do you save right now? How much are you worth? It helps to get a handle on these things before you start planning your financial future. Starting on the next page you'll find two worksheets that will help you calculate your personal cash flow and net worth. Not only will they give you a rough estimate of where you stand right now, but they'll also help you figure out how much you can save and where you can cut back if need be. Any debt problems — particularly those arising from high-interest credit cards — should become obvious. Our Debt Management section can provide you with strategies on how to lighten the load.
Step Three — Finding the Right Mix
Asset allocation is fundamental to managing the risks of investing. Study after study has shown that portfolios invested in different kinds of assets — stocks, bonds, cash — perform better and are less risky than those that rely on only one type of asset. Our asset-allocation worksheet will suggest what sort of mix you should have based on your age, financial situation and your views on both risk and the economy. Use it as the framework on which to hang your investments for retirement, a tuition fund and other long-term objectives.
Step Four — Taking the Plunge
Most people's goals break down into four areas: saving for retirement; amassing a college tuition fund; building wealth with after-tax dollars; and saving for a house, boat or some other short-term goal. Our Retirement/401(k), College Planning and Short-Term Investing sections each provide the worksheets and advice you need to draw your blueprints and think about specific investments. If you simply want to set up a wealth-building portfolio for your after-tax dollars, first visit our Asset Allocation section and then move on to The Portfolio Builder.
Step Five — Adult Education
Our college and retirement sections each lead you to our recommended list of mutual funds. So do the our portfolios. Each section shows you how to use Guerrilla Funk Wealth Builder tools and strategies to find yourself some strong investments at reasonable prices. When you're ready, it's the best way to enhance your earnings potential.
