Personal Finance Primer


Working with the right professional is important, but financial success starts at home.

Even the best financial strategy can be undermined by bad habits. The good news is you can improve those habits. Today we’ll cover:

why this is so important;
how to evaluate where you’re at;
how to improve your path forward;
and how to align your everyday finances with your retirement plan.

Let’s start with some sobering statistics from a *2020 MintLife survey:

59 percent of US adults surveyed admitted they were living paycheck to paycheck. 21 percent said they had no emergency savings, and nearly 30 percent said they don’t save any of their income. The picture gets even worse when you factor in debt. It’s estimated that every US household with a credit card carries an average of about 8,400 dollars in credit card debt, and that Americans owe a collective 1.54 trillion in student loans.

The point is, survey after survey shows that many Americans do a poor job managing their personal finances. One reason is that financial literacy is not a priority in our education system. However, another reason is that financial issues can seem overwhelming. You resist taking control because you don’t know where to start.

So, start by getting motivated. Then, determine your net worth. Identify and write down all your assets and liabilities. Assets are everything that has value, such as checking accounts, retirement accounts, and home equity. Liabilities are all your debts, like student loans, a mortgage, and credit cards. Keep it simple, but put down everything by name and dollar amount. Now subtract your total debts from your total assets to get your net worth. You want it to be a positive number. If it’s negative or nearly negative, that should be a wakeup call.

Next, determine your household cashflow by comparing income to expenses. List all your monthly income and add it up. Then do the same with your expenses, both fixed and variable. Fixed are things like your mortgage, insurance, and phone bill, while variable would be food, entertainment, and so on. For variable expenses, look back over the last few months to get an average. If you’re investing money that isn’t automatically deducted from your paycheck, include that as an expense, too.

Now subtract your expenses from your income to get your monthly cashflow. This is the most important number you need to get a better handle on your finances. It gives you a checkpoint to determine whether the changes you make are moving you in the right direction, which means more money flowing in relative to money flowing out.

Start by pinpointing your problems. If your household cashflow is only flush or in the negative, figure out why. Is it because of too many bills? Are you spending too much of your discretionary income? Determine where you might be overspending and figure out what adjustments you can make. Can you consolidate some of your debts? Cancel some subscriptions? Anything you can do to increase your financial inflow relative to your outflow will help.

Now, look at your savings. Not your retirement savings; your emergency fund. If you don’t have one, creating one should go hand-in-hand with improving your cashflow. Ideally, you should keep three to six months of living expenses for emergencies.

For most people, the best way to stay on track with these efforts is to make a budget. No successful business operates without a budget. Although your household isn’t a business, it should have the same goals as a business, financially speaking, which is to grow and build for the future.

In your case, that future includes retirement, so it’s important that all your financial efforts are aligned. If you’re in your 30s or 40s, you probably have a retirement plan geared toward growth. That makes sense at your age, but if your household finances are in disarray, you still need to improve that situation ASAP.

If you’re in your 50s or 60s and your personal finances are a mess, you need to start working to improve that situation immediately. Heading into retirement, you want as little debt as possible, and you want your net worth and cash flow figures to be as positive as possible. Even if you think you have plenty saved for retirement and aren’t worried about the poor state of your household finances, you need to take action. Complacency is dangerous.

Here are two more crucial steps to take at this stage of life. First, identify your specific retirement goals. Next, make sure you have a financial strategy that suits your goals. That means working with an Income Specialist to shift your investment focus from growth to retirement income. Think about it: even if you’ve done a poor job with your personal finances until now, what’s allowed you to keep going and live comfortably? The answer is your income. Income is the key, and that’s truer than ever in retirement.



All written content on this site is for informational purposes only. Opinions expressed herein are solely those of Arbor Financial Services of Florida, Inc. and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. Investing involves risk. There is always the potential of losing money when you invest in securities. Asset allocation, diversification and rebalancing do not ensure a profit or help protect against loss in declining markets. All information and ideas should be discussed in detail with your individual advisor prior to implementation. The presence of this website, and the material contained within, shall in no way be construed or interpreted as a solicitation or recommendation for the purchase or sale of any security or investment strategy. In addition, the presence of this website should not be interpreted as a solicitation for Investment Advisory Services to any residents of states where otherwise legally permitted to conduct business. Fee-based financial planning and Investment Advisory Services are offered by Sound Income Strategies, LLC, an SEC Registered Investment Advisory firm. Arbor Financial Services of Florida, Inc and Sound Income Strategies LLC are not associated entities. Arbor Financial Services of Florida, Inc is a franchisee of the Retirement Income Store. The Retirement Income Store and Sound Income Strategies LLC are associated entities. © 2021 Sound Income Strategies


Is the economy at a tipping point?

Is the economy at a tipping point?

Is the economy at a tipping point? Inflation, rising interest rates, market volatility and talk of a new recession. That’s…
Understanding Your Retirement Account Options

Understanding Your Retirement Account Options

401k, 403b, IRA, Roth IRA… Your retirement savings options can get confusing. I’m here to help. Choosing the right type…
SECURE Act 2.0 Update

SECURE Act 2.0 Update

Now that congress has passed more changes to the laws around retirement planning, what does it mean for your plan?…
Financial Spring-Cleaning Tips

Financial Spring-Cleaning Tips

When you’re spring cleaning your house and yard this year, don’t forget your finances. Just as your house doesn’t clean…

Get Your Retirement Planning Questions Answered

We Are Here to Help

Schedule a complimentary 15-minute call with one of our advisors.