How To Be Your Own Financial Advisor

Ironically, a guide from a financial advisor

Photo by Alexander Mils on Unsplash

All of us have money problems. They vary in terms of perspective.

Living paycheck to paycheck is a problem. Not knowing how to invest their extra cash is a problem.

Even kids have money problems. For example, my 2-year-old niece has a money problem but just doesn’t know it yet. She wanted to buy a slide, but we told her not now because that’s too expensive.

When we aren’t sure what to do, we seek financial advice from friends, family, and strangers on the internet (like me, if we don’t know each other).

But, I personally believe we hold the key answers to our questions. We just need guidance sometimes. That’s why I’m a firm advocate of being responsible for your personal finance, so you know which kind of advice to listen to.

In this article, we’ll talk about the roadmap of financial planning. Let me guide you in navigating your financial journey without putting too many restrictions. Where’s the fun in that?

Edited using Canva. Image owned by author.

Step 1: Improve Your Cash Flow

During my financial consultations, I ask my clients three things:

1. How much do you earn?

2. How much do you spend?

3. How much do you save?

Why? Because cash flow is king. It tells you which component of the formula you can adjust.

Cash flow = Income — Expenses

Once upon a time, I lived by “living below my means”. If I could just save this amount of money for this amount of time, I could buy this thing.

Don’t get me wrong, though. I still try to control my expenses by asking myself first what’s the intention behind it.

As a financial advisor, if you ask me now, I’d rather tell you to EARN MORE than restrict your saving or spending habits.

• Do you want to save more for your dreams? EARN MORE.
• Do you want to spend more on things you love and make you a better person? EARN MORE.

I think it works best regardless if you’re a saver or a spender because time is of the essence. The caveat, though, is it takes effort, patience, and grit to upskill and be more creative with money-making activities.

Still, there are people who earn more and find it troublesome to improve their cash flow. If you’re facing the same troubles, maybe you can try these money management techniques that worked for me:

• Track your expenses using a budgeting app that works for you. We all have preferences (mine is Bluecoins), so you must do some trial and error for this part.

(Tip: If it’s your first time, don’t create a budget yet for the first month. Just track everything you spend for your baseline data to create a habit. You can start adjusting the budget limits for the next months.)

• Categorize your expenses. Some examples are groceries, transportation, utilities, shopping, health/fitness, personal development, tithes, family contribution, etc. This way, you’ll learn what you prioritize most based on your spending habits.

Screenshot owned by author

• Track your progress. I like to use an Excel/Google Sheet to see how my net worth (assets minus liabilities) changed over the years.

Screenshot owned by author

Step 2: Get Out of Debt

Once you earn more, you can allocate more to paying off your loans.

I know certain circumstances may have led you to choices where you had to get that loan.

Whenever you have the capacity to pay, pay what you owe first. Take that as an act of goodwill for that person who was so understanding to let you borrow the money.

This is a friendly reminder that your borrowed money was meant for something else — say, a dream home, education fund, or emergency fund. Let us not delay the dreams of people who helped us when we needed it the most.

If you have an outstanding credit card or loan balances, you can apply the “snowball effect”. Pay off the smallest debt first, then the next, until you settle them all.

Although, there are circumstances — such as good debt — where it’s more strategic not to pay off the loan completely. Understand the concept of leverage and rotate the money around your assets to create more.

Step 3: Set Up Your Emergency Fund

So you won’t resort to bad debts anymore.

You’ve probably heard of rules of thumb for the amount of emergency funds you have to save up. But essentially, it’s up to you how much.

Ask yourself: If I stop earning income now, how long can I live off my emergency fund to find another source of income?

It may be three or six months’ worth of your monthly expenses or monthly income. It depends on what amount gives you peace of mind.

You know that when unforeseen events happen that need financial solutions, you have the resources. You can afford to pay because you are prepared.

Step 4: Manage Your Financial Risks

Good news: You’ve started to gain momentum and bought assets under your name.

Bad news: You have something to lose.

Unforeseen life events like damage to property, critical illnesses, disabilities, accidents, and untimely death are all financial risks. Any of these risks could shake your financial stability.

We don’t want any of these to happen, so we must protect our assets.

That’s why people get all sorts of insurance — for their vehicles, houses, businesses, travel luggage, and especially life.

Life insurance is perhaps the riskiest of them all because death is for certain. Yet somehow, some people have property insurance but none for their life. It may be a special case (such as high-risk individuals) or choice.

Still, allow me to ask — do you worry about these things?

• You pass away too soon while your dependents are too young or too old to provide for themselves.
• You retire with little savings or can no longer support yourself.
• You get critically ill, disabled, or get into an accident.
• You cannot put your children in school or college anymore.

If your answer to any of them is YES, you probably need life insurance.

If not, then proceed to the next step.

Step 5: Invest For Your Future

This is the best opportunity to tap into the wealth frequency and build systems that make money for you.

These could be bonds, stocks, mutual funds, index funds, commodities, real estate, cryptocurrencies, precious metals, paper currencies, etc.

There are different levels of risk appetite for each of these investments. They are not made the same, so you have to invest in something that you understand.

Some people want to invest but don’t want to learn beyond the fundamentals. Don’t worry; there are fund managers who do this for a living. If it’s worth your time and peace of mind, you can pay the fund management fees.

This is also a good time to learn how to manage your investments actively. Build your own portfolio of investments once you gain more confidence.

Step 6: Estate Planning

There are two certainties in life: death and taxes. You can be prepared for both by:

• Making a last will and testament: this is the only way to ensure that your money and possessions go to the people you wish after your death.
• Estate tax planning: to avoid leaving your loved ones with a hefty tax bill after you’ve passed away

You might want to sit this one out and get a professional estate or tax attorney. You might hurl planning for your death while figuring out how taxes work simultaneously. Personally, I’d rather let the professionals do the work.

And that is your financial planning roadmap.

If you take these all in one go, you’d be overwhelmed. So take it slow. Bookmark this and come back to it as you find your own pace.

Admittedly, I know this takes a lot of time and brain power. Believe me; I tried to learn to pay for my own taxes. But when it was all too much for my brain, I figured I should just hire an accountant.

So if you really need help, seek a financial advisor you can trust.

But first, know that you’re the best person to decide how your financial journey goes. Trust in your decisions ❤