Part Two
by Gee C. Cash
Why Is Financial Planning Important?
It is expected of people to control their finances and keep a record of their expenses. Sadly enough, a lot of people are controlled by their money. Decision making plays is an important role in our daily lives and can influence our choices especially when it relates to a financial activity.
A spendthrift will always end up bankrupt because he or she fails to be accountable for his cash flow. Financial Planning ensures that there is a stable cash flow running in and out of your hands. You will not be able to make a detailed financial plan if you can’t account for the channel in which money comes in and goes out of your account.
Documenting the outflow and inflow of funds will make you know how much was spent on expenses, how much was gained and how much is left to save or invest. Also, it allows you to consider your investment options and choose an ideal one which properly fits your aspirations and needs. If you are thinking of investing in the money markets, you should know it isn’t a long-term investment.
The money market is a low-risk investment that matures under a year. Hence, if you are a banker or an employer, the money market may not be the right investment for you due to its short-lived nature. Apparently, individuals are advised to open a money market account because they stand to receive better interest rates than on a savings account. With the availability of various money market funds, it is crucial for one to understand how the money market works before investing.
Steps To Take When Investing In the Money Market
1. Make a research to learn about money market funds.
2. Find out the advantages and disadvantages of the money market funds.
3. Check the historical statistics of the money market funds.
4. Get a brokerage firm to help you invest.
5. Get insights from your brokerage firm to track your investment.
You should lookout for a renowned brokerage company or mutual fund company before investing in the market. Ensure that the brokerage firm is licensed and regulated. We advise that you go for a certified financial planner (CFP), which is a sign of credibility. Check the website of the brokerage firm to get more materials and tools to educate your-self. One can move on to get a credit report to see how marketable they are to the commercial markets.
It is important for you to run a research or review on your credit because banks and brokerage firms can check it to make decisions about you. Usually, the financial plan should have a retirement plan where it should outline the strategies in which you’ll use financial markets to derive your income after retirement.
However, a 401(k) could work. The 401(k) is usually financed by the employer, who gives liberty to his workers to save and invest part of their wages or remuneration before taxes are taken out of it. The 401(k) allows you to control the way your money is invested. If you are facing a selection headache in choosing the right investment to make, you may consider hiring a qualified portfolio manager to help you make investment decisions.