Many people are never formally taught how to organize their personal finances.
Few schools require courses much beyond how to balance a checkbook, so a proactive interest in managing your finances must be taken in order to maximize the potential of your earnings.
There are key elements that must be considered when someone is planning a financial future. It is necessary to evaluate your current financial status while setting realistic goals for the future, which should include saving for retirement and emergencies.
Having goals to work toward is a necessary element of designing an effective financial plan.
When deciding on your financial goals, Richard Dworsky, a financial adviser for American Express, said it's helpful to review your financial past and current resources in order to establish your risk tolerance and investment personality.
He said that planning a time frame in which to accomplish your goals is a good idea, in addition to analyzing what you've learned from previous investment experience -- both good and bad.
Saving
Saving money is an essential part of organizing your personal finances.
You should have money saved specifically for emergencies, in the event of a job loss or unexpected expenses. It's also important to have money saved for retirement, because few people work throughout their entire lives, and for most, it is something upon which they will eventually depend.
Brad Pratt, a financial advisor at Pratt, Kutzke and Associates, L.L.P. in Mankato, Minn., said that the mistake so many people make with their finances is to spend first, then save. A systematic approach of putting money away, such as automatic account withdrawal, is a useful saving tool for many people.
"People need to pay themselves first; by paying themselves first, they can accumulate money," Pratt said.
As far as where to save your money, Pratt suggested a money market account, which allows for your money to earn interest.
He said that the amount of money in which people save is dependent on their amount of income. For example, a married couple in which both parties work might set aside a larger amount of money than a self-supporting single person.
For younger people who are trying to accumulate some available money, Pratt said that putting aside at least 10 percent of each paycheck would help to sufficient in helping to build some available money.
Another factor that greatly affects your financial future is at what point you decide to start saving and how much you save.
Financial experts agree that earlier you start to save the better.
If you were to start saving later in life, you might be putting away more money to be saved, the interest would still be less. By saving your money in a vehicle that accrues interest, the earlier you save directly increases the amount of interest that collects on your money.
People save for many different reasons, some for college, a house or retirement.
In addition to those reasons, people should have emergency savings, which should be an amount nearing three to six months of their average monthly expenses, according to Adam Duey, a financial planner at the North Star Resource Group in Minneapolis.
He said that having this cushion would be beneficial if unexpected expenses arise, like an illness or a major car repair. This money will also act as a cushion if you lose your job and give you ample time to find a new one, illustrating how important saving is to your financial security.
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