What exactly is financial planning and why do we hear so many experts heralding it as being a cornerstone in any financial gameplan? Why is it important to undertake meticulous financial planning when considering investing in anything from the stock market to precious metals to the real estate market ?

Financial planning is the process of determining how to manage credits, debits, savings, earnings and wealth in general. It is absolutely necessary for anybody who is serious about setting financial goals for their future and it is essential for anybody who is a head of household with a family that relies on them.

Because our goals and desires change as we grow older, financial planning and investing is a task that is never finished. How we are financially able to reach these goals, and the risks that we are willing to take to get there means that any reasonable financial plan must be specifically tailored for an individual or family. Financial planning begins by taking into account the individual assets and liabilities at that particular point in time and balancing them against anticipated assets and liabilites.

An individual’s assets can include their current earnings, life insurance and all speculative investments along with any physical assets such as your home, automobiles, tangible valuable goods and other items that are of value.

Liabilities can include mortgages, car payments, personal loans, credit card debt and recurring bills such as electricity, water and other utilities that are common to household operation. Additionally, there are always hidden liabilities such as medical expenses, home repairs and other unforseen costs which may arise from normal day to day life.

Entering into the equation are other sources of ongoing income and increases in hard asset wealth earned through employment but can also include other sources such as possible inheritances and settlements from lawsuits. These factors must also be considered when calculating a financial plan. Increases in hard asset wealth, such as rising home prices, can also be affected by general economic conditions such as rises and falls in the current economy or changes in the real estate market.

Depending upon our particular stage in life, whether we are young, old or somewhere in the middle, will usually lead us to calculate a desired set of particular goals influenced by our current situation. Financial planners will often break down an individual’s life and earning cycles into several distinct phases to maximize the importance of setting time oriented goals. The particular phase that we are in is often determined by age but will also be dictated by how much risk we are willing to take on our path to prosperity.

Quite often, when speaking of younger people, they are most often described as being in a wealth accumulation phase. Their earnings have not yet peaked but at the same time they are laying ground to obtain both hard and soft assets through career advancement.

Examples here include younger couples saving for a new home or saving in anticipation of a child’s future education. Risk assumed here will be tempered by the time constraints of these goals as well as individual risk tolerance. In general, the longer the time frame, the more investments in the aggressive category may be considered because assuming risk and volatility while young gives one far more time to make up for past mistakes than assuming great risk at an older age.

Futher planning phases extend our goals into middle age and beyond into the retirement years. The middle age years often find individuals and families at the peak of earning power with many former goals already met and satisfied. This will mean a greater possibility for increased savings and as time progresses towards retirement, the tolerance for risk will diminish.

Financial planning takes all of this into account and more. Other factors, including planning for health care and other insurance needs, preparation for emergency expenses, tax and estate planning and the like will all be part of the ongoing strategy. Unexpected windfalls may also enter into the picture as an individual grows older, however, saving for retirement will always be an important aspect of financial planning for the day when the earning cycle slows down or stops completely.

All of these variables and equations will add to the importance of financial planning across all of the stages of an individual or families lifespan. Financial planning is a ubiquitous concept that encompasses your total wealth picture both in the present and for the future.

In my previous article about finding the best deal on insurance, I touched on the idea that insurance, for the most part, is a necessary evil that plays an important part in our financial liabilities. The vast majority of consumers know why it is important to carry serveral insurance policies for their home and family. What most are unaware of is the important role adjustors can play in a settlement.

When an insurance policyholder files a claim, an adjuster will be brought in to verify that the coverage applies to the insurance policy, investigate liability for any damages and make restitution to the policyholder. In most cases, an insurance company will appoint a staff adjuster to the case and the policyholder will be offered a settlement based on the staff adjuster’s findings and recommendations. All too often, a policyholder will accept the settlement without dispute and feel they have been given the best deal possible. To understand why this is type of thinking can possibly cost a policyholder significant amounts of money owed to them, you must understand a few basic principles about insurance adjusters.

To begin with, there are three type of insurance adjusters:

• Staff Adjusters - Hired by the insurance company to investigate claims for the company.
• Independent Adjusters - Independent contractors hired to investigate claims for the insurance company
• Public Adjusters - Employed by the policyholder to negotiate with the insurance company

Both staff and independent adjustors have the insurance company to think of first when they are evaluating a claim. Independent adjusters often are retained with a commission based incentive which means they will get paid more if they are successful in getting the policyholder to agree to a lesser amount. Staff adjusters are working a different angle for the insurance company because a salaried adjuster will be subject to routine performance evaluations that can impact their salary and benefits.

A public adjuster is an an advocate for the policyholder in appraising and negotiating an insurance claim. Public Adjusters exist because of the a conflict of interest that arises when one person attempts to represent both sides of a settlement. Public adjusters are the only type of claims adjuster that can legally represent the rights of a policyholder during the claim process.

It is always a wise idea to let public adjuster review your claim even after you have settled with your insurer because most of the time a public adjuster can request that the claim be reopened to negotiation for more money if discrepancy is found.

The majority of policyholders are unaware that public adjusters even exist as an option to dealing directly with the insurance company representatives. A professional, conscientious public adjuster can make a tremendous difference in the amount of a policyholder’s settlement.

If you’re a policyholder and have filed a claim, don’t let your insurance company walk away with money they owe you. Make sure to consult a public adjuster before taking any offer.

This article is a true example of how shopping around for the best deal can save you a lot of money in the long run. Most consumers are all too typical and take the first solution or offer they receive on a product or service without shopping around for the most cost effective solution. That was true in this case…

A friend of mine who is an antique car collector was talking to me about problems he was having with the neighbors complaining about him having several cars parked in his driveway. His solution was to rent warehouse space for several of his vehicles at what seemed to him, the best price of $850 per month for the square footage he required. This translated into over $10,000 per year in costs that would not be deductible on his taxes and the price didn’t include the cost of insuring the vehicles.

My friend has quite a bit of open land on his property and I suggested that he look into constructing a steel building as a secondary garage to house the automobiles. I did a quick search on the internet for steel building manufacturers and I came across a company in Pennsylvania who specialize in metal steel buildings for commercial, agricultural, industrial, and residential building use. One of the most common use of their products is for homeowners who are car collectors and want to add additional garage space for their vehicles.

After my friend priced the cost of having the new garage addition completed versus the cost of renting a storage space, he realized that the option I had suggested would end up paying for itself in a few years. As an added benefit, the new structure will not only increase the value of his home but he will be able to use his homeowners insurance to cover the vehicles for a lot less money than taking out a new policy if he decided to rent warehouse space. Additionally, in most cases repairs can’t be deducted from your taxes but improvements and additions to your main home can usually be deducted in full in the year paid, otherwise, they can be deducted over the life of the mortgage.

Over the course of 10 years, my friend’s overall savings will amount to enough money to pay for his youngest daughters college tuition and now he will have all his precious cars on his own property and the neighbors will be happy.

There’s no question, a budget is the best way to gain control over your household finances and live a life free of financial stress. Here are a few simple steps for planning a budget for yourself or your family:

Step 1: Collect your financial information together. This will include every credit card statement, bank statement and your receipts. Anything that documents your expenses for the last three months needs to be collected. What are you going to do with this information? You’re going to use it to categorize your expenses. What do you spend on your home? What do you spend on your car? Your food? Your health? Entertainment? You’re not tracking your expenses right now, you’re simply coming up with expense categories and sub-categories for your budget. If it makes it easier, begin by drafting the categories and sub-categories you think your expenses will fall into. As you go through your expenses you can verify your category decisions.

Step 2: Gather your income statements or profit and loss sheets and determine how much money you really have to budget with. You can use either your net or gross income as your number, just be consistent. Also, if you choose to use your gross income, make sure to account for your taxes on your list of expenses.

Step 3: Using the same documents you used to create your budget expense categories and sub-categories, now examine how much you spend each month on each. I highly recommend that you write this number down. It may be an eye-opening exercise, but it will also help you predict how much you will spend in the future. You want your budget to be a realistic reflection of your spending habits, not a financial diet.

Step 4: Find a method of recording your budget. This could be a simple spreadsheet where your columns are a list of your categories, your weekly or monthly available spending amount, how much you actually spend and the difference between the two numbers. Your rows will be the income and expense categories you’ve already established.

Step 5: Create a budget, keeping in mind that you will want a budget category devoted to savings goals too. Once your budget is created, spend a month or two following it. Keep your budget close at hand so you can track your finances closely. Assess your spending on a weekly or monthly basis. Re-evaluate your budget if you need to. Your budget is not set in stone and some of your expenses are variable, meaning you control how much you spend on them. For example, entertainment is variable and your mortgage is fixed.

A budget is nothing more than a spending plan. It isn’t a financial diet. It is a tool to control your money and be knowledgeable and smart about where it goes. It’s your money after all, and isn’t it great to have the upper hand?

Today I had a request from one of my readers to start a series of articles about how families can save more money by cutting down on expenses. In particular the request was from a reader in the United Kindgom who was struggling with heating bills on her old boiler system. Being from the US and having an old oil heating system in my Florida winter home, the first thing that crossed my mind was to tell her to contact a boiler service to have a technician come out and perform boiler servicing. At the time I was reading her request, I had had a technician in my home performing the bi-annual servicing of my heating system. One thing homeowners often overlook is servicing their heating or cooling systems on a regular basis. In boiler and oil based heating systems, it is critical to have the burners, ignition and heat exchanges serviced as well as having all of the seals and visible pipework checked out for leaks. Servicing will not only cut down on heating expenses, it’s absolutely essential for the safety of your home and family. Many home fires are caused by faulty heating systems and depending on the type of system you have, a system with leaks can cause carbon monoxide poisoning. Recently, in the news here in Florida, a woman and her family were poisoned and almost died because carbon monoxide was leaking into their home from a faulty system and they hadn’t replaced the batteries in their cardon monoxide detector. In another event, an old lady in my neighborhood who has a similar system as mine kept trying to restart her system when it failed. She kept pressing the ignitor to restart the system and eventually the system exploded sending the poor old lady to the hosiptal. Fortunately she was not killed and only a small portion of her home caught on fire. The lady didn’t know that it is dangerous to keep resetting the ignitor because after three presses it usually means the system is out of fuel or needs to be serviced.

For my reader in the United Kingdom, I did some research and contacted a friend who lives in Telford who recommended I visit website of Northern Gas Heating who are a CORGI certified boiler servicing firm offering boiler service at just £55 + vat. Their service is the cheapest on the UK market at this time of writing and their website has a wealth of information regarding options for not only service but for replacing old boiler units with new high-efficiency condensing boilers that could save a homeowner around a third on their fuel bills. The website also features a section on heating system troubleshooting that covers numerous topics for troubleshooting a boiler system. For any UK based readers interested in boiler service or boiler servicing, you can contact Northern Gas Heating via the information below:

Northern Gas Heating
Harrison House
Marston Road
Wolverhampton
WV2 4NJ
Phone: 08707 66 40 70
Fax: 08707 66 40 71
Web: http://www.northerngasheating.com

Over the next few months I’ll be continuing this article series about “Cutting Down on Expenses”. If you have a question you’d like to ask, please feel free to use the contact form and I’ll respond to your question as best I can here on the blog.