What Financial Planning Tools Should I Be Using?

No matter who you are, financial planning is something that's necessary for everyone. If you're like most people, financial planning might seem very complicated and confusing, and you might not know where to start. However, financial planning tools can help. Here are some ideas to get you started.

First and most importantly, you need to have a good budget in place, and you need to follow it. There is no way to reach your financial goals without a budget to help you reach them. Having a budget will help you allocate money such that you can pay your debts and plan for the future at the same time.

The second thing that you need to plan for retirement is a savings account. Other investments are certainly important, but a savings account is something that you need in order to have easily accessible liquid cash available for emergencies, but able to earn you some interest at the same time. You can check with your bank to see what savings plans they have available. There are also many good online banks that offer very competitive interest rates, some nearly as high as a money market savings account, with the added protection of having your deposits federally insured up to $100,000. In some cases, these accounts have savings rates that go up as your balance goes up, so you might start with a lower interest rate at one level and earn a higher interest rate as your savings account level rises. Many of these places also offer "no minimum deposit" plans, so you can start saving with just $10 to $25. Keep in mind that this is important, since getting in the habit of saving is just as important as how much you save. If you wait until you "have enough" money to begin saving, you never will.

The next thing to check on is your credit report. Several web sites offer you a credit report for a fee, but the government also has a web site at annualcreditreport.com. There, you can check your credit report at each of the three major credit bureaus for free once a year. If you need to check it more often because of frequent changes or because you are at risk for identity theft for some reason, then a credit reporting service may be the way to go.

Managing your debt can be daunting, but there are a few financial planning tools that you can use to make it easier. Credit cards are a way of life in today's world. You can use the extreme competitiveness of credit card companies to your advantage. Only carry a few cards, and make sure that those cards have the lowest possible interest rate. Many cards will send you balance transfer offers that allow you to transfer a balance from another card at a very low rate. Be sure to take advantage of any reward programs that are offered so that you can get the most from your purchases.

Fifth, one of your most major bills is probably your rent or your mortgage. Of the two, a mortgage payment usually better for you, since you can usually deduct interest you pay on your mortgage from your taxes. When interest rates drop or some other financial situation arises where refinancing would be a good option for you, make sure you check into this and refinance if possible, in order to lower your mortgage payments. Usually, the most prudent way to handle a refinancing is to roll your refinance savings into your mortgage, so that you save on the mortgage itself rather than taking the cash out to spend on something else. This will save you up to several years on mortgage payments, depending on the length of your loan.

Finally, perhaps the greatest financial planning tool anyone has is a retirement plan. Unfortunately, for many people, this financial tool is greatly underused. If you have a job and your employer offers a 401(k) plan, you should be participating in it and making the maximum contribution, or at least as much as you can possibly spare. Choose a diversified plan that will let you save as much as possible for your retirement and protects against losses in one particular sector. Once you begin working, start funding your 401(k) right away. The earlier you start, the more money you will have at retirement.

In short, a few good financial planning tools can help you manage your money so that you live well at retirement. Do plenty of research and take advantage of all resources available to you. Many financial planning tools exist that are free or very inexpensive, either at your bank or on the Internet. If you use financial planning tools wisely, you'll get the most out of your money and eventually, out of your retirement.