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How to Be Your Own Financial Planner (Basics)

Most people don’t *need* a financial planner (although one would be very helpful, as there are concepts/tips/strategies that a solid financial planner understands much more than the average person). My goal with this post is to offer a comprehensive guide to taking care of your own personal finances.

For almost all financial work, I like to use Google Sheets or Microsoft Excel. They are simple, easy to learn, and can perform all relevant calculations.

Current Situation

1. Create your Balance Sheet
A balance sheet is simply your assets (what you own) and your liabilities (what you owe) all put down on paper (or a spreadsheet).

Assets – Liabilities = Net Worth

2. Create your Income Statement
An income statement shows your income (money coming in) and expenses (money going out) in a given time period (usually a month).

*These first 2 steps are to evaluate your current situation.

3. What are your goals and when do you want to accomplish them?
Short-term, long-term, personal, financial, etc. Understanding what your goals are for your life are paramount to actually reaching them.

Once all of these are recorded, you will be able to make projections to figure out how to reach your goals.

Create a monthly projection sheet for what to expect and how to best handle your cash flow month-to-month can be helpful.

Keep track of the actual end-of-month balances to see the accuracy of your projections and if anything needs to be tweaked going forward.

*Example Spreadsheet*
After completing the above, your spreadsheet may look similar to this.

Assumptions (by tab):
Balance Sheet
See tab

Income Statement
Monthly take-home income: $3,000
Monthly expenses: $1,760 (inflation-adjusted)

Current Age: 27
Retirement Age: 67
Marital Status: Single
Inflation: 2%
Investment Return: 6%
Social Security income (full retirement age: 67): $2,000 (no COLA adjustment included)
Future mortgage interest rate: 4%

Order of operations:
1. Build up an emergency fund of about 6 months of expenses
2. Pay off debt starting with the highest interest rate first
3. Save up until a $30,000 down payment can be made on a $150,000 house
4. Pay minimum mortgage payment and invest excess cash in a taxable investment (brokerage) account.
5. Retire at 67 and collect Social Security

Quick tips
1. Employer Match
If you are employed and your employer offers a matching program, max out the employer match. It is free money. If they will contribute 50% of your first 6%, contribute 6%. If you can’t because you can’t make your bills, cut your expenses. Find a way.

2. What to Invest in
See What I Believe to be the Best Investment Strategy.

See also:
How to Get Out of Poverty and Stay Out

If you have any questions or suggestions, please let me know by emailing blake.pokley@captainministry.org or leave a comment below. Thank you!

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