financial planning

Developing Your Life's Vision and Mission

Many of us seek knowledge and fulfilling experiences in the expectation that it will enable us live a great and meaningful life. However, for many this exercise usually occurs in the subconscious and it’s power is never fully leveraged. A popular way to take this effort to the next level is to develop a personal vision and mission statement. Your vision and mission statements will help you clearly articulate the things in life that are most important to you. These statements will also help you steer your life in the direction that you want it to go. In addition your life’s mission and vision will assist you develop your financial plan's goals and objectives, which are an important element in the financial planning process.

When all is said and done, your personal vision and mission statement should be the focus of your financial plan. This is due to the fact that your financial plan is a tool that will help you gather the financial resources needed to live your life the way you want to. Thus before you develop your financial plan, you need to have a good idea what you want to accomplish in life.

Determining Your Life's Vision

A vision statement is an inspirational description of your life's overarching purpose and values. When illustrating your vision you can choose to focus on describing the person you want to be. This includes areas in life such as family, leisure activities, education, community involvement and personal relationships. Here are a few examples of a vision statement for inclusion in your financial plan:

"I am a hardworking and dedicated small business owner who believes in spending quality time with my closest family and friends."

"I am a nurturing Mother of 3 who values education, loyalty and giving to those less fortunate."

"We are a strong, yet independent couple, who believes in building successful careers and enjoying travel to exotic locations."

When developing your vision statement remember it’s important to focus on the values that are most important to you. Our values influence our financial decision making process and help form our priorities. When using a list of your values to guide the development of your goals and objectives you will effectively steer your life in the right direction.

Determining Your Life's Mission

Your mission statement should be a declaration of what matters to you the most and what you are setting out to achieve. When writing your mission statement there are a few key factors to consider. First, what are a few of the most important things in your life? What do you value the most? Second, what does success look like? Describe what you are working towards. Below are a few examples of a mission statement for financial planning purposes:

"My mission is to increase the standard of living of my family through financial discipline and providing the best education available."

"My mission is to become a respected proponent and spokesperson for disabled Veterans and their families."

"My mission is to increase the adventure in my life through engaging in a variety of outdoor activities."

The critical element in your mission statement is a description of what you want to achieve, or in other words, what should be the results of your life’s work. Your mission should be a concise statement of your sole purpose.

Developing your personal vision and mission statement will help you live a fulfilled and enriched life. By understanding your values and purpose in life you can increase your chances of accomplishing your personal goals and objectives.

Introduction to Long Term Care Insurance

As the baby boomer generation begins to retire en masse, more and more attention is being paid to long term care insurance. Despite the fact that many of us do not like to pay insurance premiums, insurance of all types play an important role in our financial plans. Long term care insurance, like all other types of insurance, helps to reduce the financial impact of unforeseen and dramatic life events. Without insurance, an event such as a car accident or house fire can quickly drain any and all of a family's savings.

Today there is a growing risk to our financial well-being; advances in modern medicine and technology. With the help of advancements in the medial industry we are living longer than any other generation. Despite the obvious great things that come with a longer life, to the retired, living longer will significantly increase all types of medical costs.

Common Long Term Care Insurance Questions

Who Should Buy Long Term Care Insurance - Long term care insurance should, more than likely, be purchased before retirement or as you approach 65 years in age. The additional costs of long term care insurance premiums will be enough to turn a few people away. However the costs of not being insured will be much more.

Why Purchase Long Term Care Insurance - The Government sponsored medical insurance, Medicare, only provides 100 days of skilled nursing care. In addition to this restriction, Medicare beneficiaries will not qualify for long term care needs unless it follows a hospital stay and after significant personal cost.

How Much Does Long Term Care Insurance Cost - Market research (conducted in 2013) has shown that purchasing long term care insurance can cost from $1,300 to $4,600 annually. Most of these policies provided a benefit of $150 a day with a term of 4 years. When compared to the cost of the average nursing home stay of $89,000, the costs of long term care insurance premiums are insignificant.

Popular Long Term Care Provisions

Guaranteed Policy Renewal - A life insurance policy is inherently a business contract, one party agrees to cover the potential large costs of an individual while the individual agrees to pay a small fee consistently overtime. If the contract (policy) does not include a provision that the coverage must be renewable for life, the policy and any coverage can be cancelled.

Medical Cost Inflation Protection - In addition to education, medical costs are one of the fastest growing personal expenses in the U.S. economy. A good long term care policy should included a provision that protects the policy holder from the increasing cost of medical care.

Pre-hospitalization Coverage - As mentioned previously, Medicare will most likely not cover the costs of long term care if a hospital stay was not required. To avoid this situation ensure that your policy does not require that your coverage require hospitalization first.

Comprehensive Long Term Care Services - When comparing different long term care policies, keep in mind that assisted living, home health care and nursing home care is available. It is unknown what the future holds, thus its a good idea to have all three services in your policy.

Long term care insurance is an increasingly important element of a financial plan. Long term medical issues can place a large financial burden on a family in it's most pressing time of need. To avoid financial catastrophe, ensure that you and your family are properly covered.

Financial Education is Critical

There should be no surprise when I say that we live in interesting times. This is especially true when we think in terms of our National economy. I have often argued that we will eventually find our way out of this mess, however the time it will take is anyone's guess (and despite what the talking heads on the news will tell you, it is a guess).

There is no single decision or action that we could have taken to avoid our current financial struggles. Regardless, I do believe that teaching personal finance in our public schools could have reduced the dramatic effects that we all feel today.

The Impact of Financial Decisions

Everyday we make at least a few financial decisions. We have the tendency to assume that these decisions only affect us in the short-term. However, over a significant amount of time these financial decisions begin to define our behavior and, consequently, quality of life.

Many of us are not equipped with a basic understanding of personal finance before we graduate from high school. So it can’t really be expected that we know the right financial decisions to make as we become adults. This has a significant impact on our personal lives, the lives of our loved ones and our economic prosperity.

Financial Education is Critical

Provided that finance plays such an important role in our lives, it is critical that financial education is included in our school’s core curriculum. Imagine knowing what you know now about personal finance when you were just becoming an adult, I bet you would have a little more money in your pocket and a little more freedom to enjoy.

Now take that one example of the value of financial education and multiply across the entire United States. Imagine the improvement in our everyday lives as we make better financial decisions as a Nation. I believe that overtime, the impacts of sound financial decision making will have a huge impact on our economy and improve our standard of living across the board.

Learn More About Personal Finance

I have my doubts that this article will have an impact on our Nation’s education policy. So, with that said I believe that we are on our own when it comes to teaching ourselves and our children the importance of a financial education.

Luckily, there are thousands of websites and books that provide information about financial planning and personal finance in general. The hard part is finding the time in our busy lives to actually sit down and read it.

One way that I’m able to find the time to consume large amount of free information is through the use of RSS readers for blogs. When I’m on the bus in the morning, I download all of the new feeds from my favorite blogs and read them on my way to work. It’s free and easy.

I believe that with more financial education in our schools, we will be able to make better financial decisions and consequently improve our standard of living. I believe that this is true on the individual and National level. However, until our schools include financial education in their curriculum, we can always get good and free financial information from blogs and books.

A Few Ways To Increase Tax Returns

About this time every year most of us get a little excited about getting a tax return check from the U.S. Treasury. While it's best to change your deductions to ensure that you are not paying more taxes than you should every paycheck, it's nice to receive a few hundred dollars after the holiday season.

While it is tempting to spend your tax return on the newest gadget, I feel compelled to note that paying down some of your debt or investing it can feel just as rewarding.

While a few hundred dollars might not make a substantial dent in your debt or make a huge difference in terms of your invested capital, the act alone can help develop good financial habits. Making smart financial decisions, such as these, consistently over time will eventually make a huge impact in your finances.

Consult with a Tax Professional

As many of us already know, taxes can be complicated. The complexity of our taxes usually increase as we grow older and acquire more assets (investments, businesses, real estate, etc.). In order to maximize your tax deductions its always a good idea to consult with an expert.

Robust online tax services usually provides all of the tax information than most of us need to maximize our deductions. These services, while more expensive than filing your taxes yourself, make the process of increasing your tax return easy and intuitive. In addition, for people with complex tax needs, Certified Public Accounts can help you increase your tax return.

Contribute to Traditional IRA

One of the best ways to increase your tax return is to maximize your contribution to an Traditional IRA. These Individual Retirement Accounts are a tax efficient way to save (and invest) for retirement. In 2012 the maximum contribution to an IRA is $5,000, however it is set for $5,500 in the 2013 tax year. However keep in mind that, depending on your situation (i.e. have an employer spnsored plan), you might not be able to deduct all or any of your contribution.

Donate Unused Stuff to Charity

Many of us have things laying around that we no longer use. In example, I have a bunch of sporting equipment that I haven’t used in years. Instead of letting this stuff just lay around and collect dust, I donate everything that I haven't used in a while. The IRS allows you to deduct your charitable donations. This allows you to keep your house clutter free and can increase your tax return.

Sell Your Loser Stocks

All of us that have a personal portfolio have a few losing stocks. This is an unfortunate and difficult to avoid situation. Regardless many of us look at losing stocks as an opportunity to make our money back. A losing stock can take a long time to turn around (if it ever does), thus its sometimes a wise decision just to sell it and take a loss.

The losses that you take in your portfolio can be used to offset your winning trades and reduce your capital gains liability. In addition, investment losses can increase your tax return by reducing your taxable income. So take a look at your losing stocks, you might be able to gain from them this tax season.

The easiest way to increase your tax return is to listen to the advice of experts. There are many deductions that you can take to increase the amount that you get back from the U.S. Treasury. I suggest taking as many as you can.

Risk Management for Financial Planning

As you develop and implement your financial plan, its important to protect your finances from the negative impacts of unfortunate events. Risks such as stock market volatility, damage to capital assets (such as your house or car) can wreak havoc on your personal finances. A critical element of financial planning is the management of risk.

Why Managing Risk is Important

Everyday we are exposed to a variety of risks. These risks can include, financial loss from investing in the stock market, potential damage to your vehicle and health by operating a vehicle at high speeds and fire damage to your home.

A large unforeseen event, such as the above examples, has the ability to drain all of your financial resources, ruining your way of life and undermining your financial plan. Managing risk helps mitigate potential financial losses and ensures that our way of life can remain unaffected by unavoidable events.

What is Risk Management

Risk management is intended to provide financial security through the use of financial strategies, tools and services. These are used in the attempt to mitigate large financial losses if and when they occur. A comprehensive risk management strategy will include the consideration of personal, property and liability risks.

Personal risk management includes the potential loss of income due to injury, poor health and unemployment. Property risks includes the potential loss of value of assets due to fire, hurricanes, negligence and other uncontrollable events. Finally, liability risks include situations such as lawsuits and damage to other’s property or person due to negligence.

How to Manage Financial Risk

One of the most popular ways to manage financial risk is through the purchase and use of insurance. Insurance protects its policy holders from large and unexpected financial losses, by compensating them, per their contractual obligation. This form of risk management is often referred to risk transfer.

A second common way to protect against potential loss is risk avoidance. In life, many risks and their consequences are unavoidable, however we can choose to avoid some risks by making different choices in life. In example we can help avoid long-term health care problems by living an active and healthy lifestyle. In addition we can avoid devastating injuries by wearing seat belts.

Risk management is an important part of the financial planning process. Without the proper risk management tools you and your way of life are exposed to potential large financial losses.