29:["$","$L2a",null,{"category":"$2b","relatedArticles":[{"id":"cG9zdDoyMjA0NTM=","databaseId":220453,"postId":220453,"author":{"node":{"id":"dXNlcjo5Mw==","databaseId":93,"userId":93,"avatar":{"url":"https://secure.gravatar.com/avatar/45e9da41857bacf2d253783adac5d9d20d9dbe4758f7c9712c3759bcec7a34aa?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Mark Henricks has reported on personal finance, investing, retirement, \r\nentrepreneurship and other topics for more than 30 years. His freelance \r\nbyline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.","additionalMeta":{"expertise":null,"__typename":"User_Additionalmeta"},"email":null,"firstName":"William","fullName":"Mark Henricks","lastName":"Henricks","name":"Mark Henricks","postCount":{"pageInfo":{"offsetPagination":{"total":822,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"mhenricks","__typename":"User"},"__typename":"NodeWithAuthorToUserConnectionEdge"},"categories":{"nodes":[{"id":"dGVybTo1","children":{"nodes":[],"__typename":"CategoryToCategoryConnection"},"databaseId":5,"categoryId":5,"link":"https://smartasset.com/personal-finance/articles","name":"Personal Finance","postCount":{"pageInfo":{"offsetPagination":{"total":166,"__typename":"OffsetPaginationPageInfo"},"__typename":"CategoryToPostConnectionPageInfo"},"__typename":"CategoryToPostConnection"},"slug":"personal-finance","ancestors":null,"parent":null,"__typename":"Category"}],"__typename":"PostToCategoryConnection"},"content":"$2c","date":"2023-11-30T13:46:00","excerpt":"

\n","featuredImage":{"id":"cG9zdDoyMjA4ODY=","databaseId":220886,"altText":"A senior couple calculating both median and average incomes.","date":"2023-11-30T13:37:30","fileSize":209427,"mimeType":"image/jpeg","modified":"2025-03-20T20:31:53","sourceUrl":"https://smartasset.com/wp-content/uploads/sites/2/2023/11/iStock-1473197607-1.jpg","__typename":"MediaItem"},"modified":{"datetime":"2025-3-20","readable":"March 20, 2025","readableExtended":"March 20, 2025, 8:32pm ET"},"multipleBylinesByRole":{"editedBy":{"id":"dXNlcjoxMTc=","databaseId":117,"userId":117,"avatar":{"url":"https://secure.gravatar.com/avatar/ec94ef289aaaff921cceaadb51aba5e4ac1e9d0ca6d0ca8350c24e727726c750?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Arturo Conde is a senior editor at SmartAsset. He has a master’s from the Graduate School of Journalism at Columbia University and a bachelor’s from the College of Arts and Science at New York University. 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You can get useful perspective about your financial condition and performance by benchmarking your income against peers using figures for average and median income. Each of these measures offers a somewhat different snapshot. While medians better reflect typical middle-of-the-road incomes, averages capture collective earnings across a group. Understanding the nuances helps savers and investors select an appropriate way to compare their incomes when making key financial decisions. Consider consulting a financial advisor to get individualized advice about different approaches to assessing your income.

","

What to Know About Net Income

","

Your net income is equal to your take-home pay after accounting for taxes and other deductions. It is helpful or even vital to know your net income because this is how much of your earnings you actually get to keep.

","

Regularly tracking your net income over time helps you develop a picture of how much disposable income will be available to allocate toward saving, spending or investing goals. You can also compare your net income against your peers. This gives you some context to evaluate your relative financial wellbeing.

","

Businesses also calculate net income by subtracting expenses and taxes from gross income. Investors look at public company reports of net income when deciding which securities to purchase.

","

Average Net Income vs. Median Net Income

","

To summarize and compare incomes meaningfully using averages and medians it helps to gain some more understanding of the concepts. In statistics, these are measures of central tendency. Central tendency measures attempt to use a single value to describe an entire set of data.

","

Averages, also called means, measure collective incomes across a population. Averages are useful and easy to calculate but can be skewed higher by extremely high outlier incomes at the top end.

","

Medians arrange incomes from lowest to highest, then identify the middlemost income where an equal number fall above and below. This eliminates the outsized influence of outliers. Median income figures are usually lower than average income figures.

","

How to Calculate Average Net Income

","

Calculating average net income involves totaling all incomes across a group, then dividing this combined income figure by the number of people. For example, consider five individuals with incomes of $30,000, $50,000, $60,000, $70,000 and $100,000. Their total combined income equals $310,000. Dividing this by five people gives an average income of $62,000.

","

Note that in this example, the average of $62,000 exceeds the incomes of three out of the five individuals. This is due to the outsized impact of the $100,000 outlier earnings figure. When averages differ markedly from typical incomes, it generally signals that incomes are concentrated among high earners and indicates that financial wellbeing is not broadly shared.

","

How to Calculate Median Net Income

","

","

Determining median net income requires arranging all incomes from lowest to highest, then identifying the middlemost income where an equal number fall above and below. For the above example with incomes of $30,000, $50,000, $60,000, $70,000 and $100,000, you would organize them from lowest to highest to determine that the median income equals $60,000.

","

By focusing specifically on the income midpoint unaffected by outliers on either end, medians can provide a more accurate reflection of typical middle-class incomes within a peer group. This often allows better income benchmarking for ordinary savers, investors and retirement planners.

","

When to Use Median vs. Average Net Income

","

In situations where average and median incomes are not too different, both measures may reasonably summarize incomes. But when averages exceed medians substantially due to high-end outlier earnings skewing the data, medians better reflect middle-of-the-road incomes.

","

That does not mean averages are useless or always misleading. Averages provide useful perspective into collective incomes overall. With that in mind, simultaneously considering both median and average income measures can create a more complete picture. For instance, consider a case where the average income figure is rising over time while the median income figure is not changing significantly. This can suggest that incomes are increasingly being directed to top earners rather than being distributed broadly across the spectrum.

","

How to Use Median or Average Net Income in Financial Planning

","

Median and average net income can help you understand how your earnings compare to others and guide your financial choices. Median income shows the middle point, meaning half of people earn more and half earn less. Average income adds up all incomes and divides by the number of people. Median is often more helpful because it is not affected by a few very high or very low incomes.

","

For example, if the median net income in your area is $50,000 and you earn $55,000, you’re doing slightly better than most. But if the average income is $70,000, that could be because a few people make a lot more, which raises the average. This can help you understand where you really stand and whether you need to change your income, savings, or budget.

","

You can use median income to set more realistic goals. If you earn close to the median, you may want to focus on basic savings and building an emergency fund. If you earn above average, you might look into more investing or paying off debt faster. Comparing your income this way helps you make a plan that fits your situation.

","

Bottom Line

","

","

While median incomes more accurately portray typical earnings, average incomes offer insights into overall earnings levels across a population. Appreciating these subtle differences allows individuals to get a different perspective by benchmarking against peers. Having access to median and average income figures can contribute to better decision-making when saving, spending and investing.

","

Tips for Personal Finance

","$34","

Photo credit: ©iStock/Pekic, ©iStock/AndreyPopov, ©iStock/SrdjanPav

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\n","featuredImage":{"id":"cG9zdDoyNTg3ODM=","databaseId":258783,"altText":"5 Ways to Generate Passive Income This Year","date":"2024-08-14T20:22:59","fileSize":167843,"mimeType":"image/jpeg","modified":"2024-08-14T20:23:12","sourceUrl":"https://smartasset.com/wp-content/uploads/sites/2/2024/08/iStock-1542498106.jpg","__typename":"MediaItem"},"modified":{"datetime":"2024-8-14","readable":"August 14, 2024","readableExtended":"August 14, 2024, 8:24pm ET"},"multipleBylinesByRole":{"editedBy":{"id":"dXNlcjoxMzY=","databaseId":136,"userId":136,"avatar":{"url":"https://secure.gravatar.com/avatar/0e89a6629b5049077641f2e8656dfec7163822262770b225cd49ccf1d7d2ff1e?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Jeff White is an Editor for SmartAsset. He's an expert in a variety of personal finance topics, such as investing, banking and retirement, and also holds the Certified Educator in Personal Finance (CEPF®) designation. Jeff has received his JD and MBA and has been featured in a number of publications, such as Investopedia, The Street, Forbes, Yahoo! Finance and more. He currently resides in Utah with his wife and five children, where they cheer for the Denver Broncos and make it to the water to sail whenever given the chance.","additionalMeta":{"expertise":"Financial Planning, Small Business, Retirement, Banking","__typename":"User_Additionalmeta"},"email":null,"firstName":"Jeff","fullName":"Jeff White, CEPF®","lastName":"White, CEPF®","name":"Jeff White, CEPF®","postCount":{"pageInfo":{"offsetPagination":{"total":16,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"jwhite","__typename":"User"},"reviewedBy":null,"writtenBy":null,"factCheckedBy":null,"secondEditor":null,"hideAuthor":true,"__typename":"Post_Multiplebylinesbyrole"},"adTargetingOverrides":{"fieldGroupName":"adTargetingOverrides","pageGroupNewKey":null,"__typename":"Post_Adtargetingoverrides"},"seo":{"canonical":"https://smartasset.com/personal-finance/ways-to-generate-passive-income-this-year","metaDesc":"Passive income can help you grow wealth without you needing to spend time to make every dollar. Here are some ways you can generate more passive income.","metaKeywords":"","metaRobotsNofollow":"follow","metaRobotsNoindex":"index","readingTime":7,"title":"5 Ways to Generate Passive Income This Year","__typename":"PostTypeSEO"},"slug":"ways-to-generate-passive-income-this-year","status":"publish","title":"5 Ways to Generate Passive Income This Year","postType":"post","subtitle":null,"uri":"/personal-finance/ways-to-generate-passive-income-this-year","tags":{"nodes":[],"__typename":"PostToTagConnection"},"__typename":"Post","adPageGroupOverride":null,"bylines":{"writtenBy":null,"editedBy":{"id":"dXNlcjoxMzY=","databaseId":136,"userId":136,"avatar":"$36","description":"Jeff White is an Editor for SmartAsset. He's an expert in a variety of personal finance topics, such as investing, banking and retirement, and also holds the Certified Educator in Personal Finance (CEPF®) designation. Jeff has received his JD and MBA and has been featured in a number of publications, such as Investopedia, The Street, Forbes, Yahoo! Finance and more. He currently resides in Utah with his wife and five children, where they cheer for the Denver Broncos and make it to the water to sail whenever given the chance.","additionalMeta":"$37","email":null,"firstName":"Jeff","fullName":"Jeff White, CEPF®","lastName":"White, CEPF®","name":"Jeff White, CEPF®","postCount":"$38","slug":"jeff-white-cepf","__typename":"User"},"reviewedBy":null,"factCheckedBy":null,"secondEditor":null},"category":{"id":"dGVybTo1","children":"$3b","databaseId":5,"categoryId":5,"link":"https://smartasset.com/personal-finance/articles","name":"Personal Finance","postCount":166,"slug":"personal-finance","ancestors":null,"parent":null,"__typename":"Category"},"isModifiedBeforePublished":true,"contentBlocks":["

If you’d like to boost your income so you can put away more for retirement, reach your savings goals faster or get out of debt, consider generating some passive income this year. In general terms, passive income is money you earn from work or investments that don’t require your regular involvement. Generating passive income can help those looking to earn more without having to constantly work for it. To get started earning passive income this year, consider the following strategies and choose one that aligns with your skills, availability and interests.

","

For guidance projecting how passive income can help you work toward your financial goals, meet with a financial advisor.

","

1. Rent Out Your House

","

Renting out your house can be an accessible way to generate passive income, especially if you have extra space or a second property.

","

There are several ways you can generate passive income by renting out your home, and you can pick the method that works best for you. First, with the rise of platforms like Airbnb and Vrbo, homeowners can easily list their properties as short-term rentals. Short-term rentals can offer higher income potential than traditional leases, particularly in popular tourist destinations. Listing your property as a short-term rental also allows you to rent it out seasonally or at whatever frequency you want. .

","

On the other hand, if you prefer a more stable and predictable income stream, renting your house long-term to tenants might be the better option. In addition to the consistent income, you don’t have to worry about constantly filling bookings and turning over the property. With this approach, you can either rent out your entire property or a room in your house. Consulting with a financial advisor can offer valuable insights into market trends and help you decide which rental strategy aligns best with your financial goals.

","

2. Start an Online Business

","

Starting an online business can be an effective way to earn passive income, and the possibilities for your business are endless. Not only that, but online businesses typically require little upfront cost.

","

One possibility is building an online business that sells digital products, such as e-books, courses or software. These products let you earn money from sales without being directly involved in the transaction process. Plus, once created, you can sell products repeatedly with minimal additional effort.

","

Another way to make passive income through online business is using a retail model called drop shipping. This model involves selling products through an online store without handling inventory or shipping. When a customer makes a purchase, the product is shipped directly from the supplier to the customer. Platforms like Shopify or WooCommerce let you set up a drop shipping store relatively quickly and tap into the global e-commerce market.

","

3. Dividend Investing

","

","

Dividend investing is a way of generating passive income with very little work. Instead, you need upfront capital to invest in order to make income with this strategy. Dividend investing involves buying stock in companies that pay regular dividends, or portions of profits, to their shareholders. This approach not only provides a steady stream of income but also has the potential for capital appreciation as the underlying stock may increase in value over time.

","

Investors can potentially earn even more by reinvesting dividends through dividend reinvestment plans (DRIPs). This process automatically uses dividend payouts to purchase additional shares of the stock, potentially compounding returns over time. Consulting a financial advisor can help you identify dividend-paying stocks that align with your investment goals and risk tolerance. With careful selection and a long-term perspective, dividend investing can be a key component of a diversified portfolio.

","

4. Buy a Certificate of Deposit (CD)

","

Buying a certificate of deposit (CD) is a straightforward way to earn passive income with minimal risk. CDs are time deposit accounts offered by banks and credit unions that pay a fixed interest rate in exchange for depositing your money for a predetermined period, which can range from a few months to several years. The primary advantage of CDs is their predictability; you can calculate how much your CD will earn by the end of the term. CDs are also insured, either by the FDIC or NCUA, up to $250,000, making them a very low-risk passive income strategy.

","

To maximize passive income, consider creating a CD ladder, which involves purchasing multiple CDs with varying maturity dates. This strategy allows you to access a portion of your money periodically, providing liquidity while taking advantage of potentially higher interest rates associated with longer-term CDs.

","

5. Peer-to-Peer Lending

","

Peer-to-peer (P2P) lending lets you earn passive income by directly lending money to individuals or small businesses through online platforms. This method allows you to act as a mini bank, offering loans in exchange for interest payments. Keep in mind that while higher returns are possible, P2P lending carries risk, as borrowers may default on their loans..

","

P2P lending platforms such as Prosper and LendingClub connect investors with borrowers, allowing you to choose loans that match your risk tolerance and financial goals. Before getting started, research and choose the right P2P lending platforms. Each platform offers different levels of borrower vetting, loan types and interest rates, and conducting thorough research can impact your returns.

","

Talk to a Professional

","

While earning passive income can help you reach your financial goals, it’s only one piece of the larger financial puzzle. Speaking with a financial advisor can help you align your passive income strategy with your overall financial strategy. A financial advisor can offer personalized advice, taking into account your unique situation, risk tolerance and long-term plans.

","

Whether you’re new to investing or have an established portfolio, an advisor can guide you in selecting the right mix of income-generating assets, such as dividend stocks, bonds, real estate and other investments that match your financial goals. They can also advise you on managing any income earned from investments and other passive income strategies. They’ll consider tax implications and help you adjust your approach as your life circumstances change. Finally, they can advise on risk management techniques to protect your wealth.

","

Bottom Line

","

","

Generating passive income is a powerful strategy for building financial stability and achieving long-term wealth. By exploring different methods, like dividend investing, peer-to-peer lending and starting an online business, you can create multiple income streams that require minimal ongoing effort. Each method has unique benefits and risks, so consider your goals and risk tolerance when deciding which opportunities to pursue. If you get stuck, consulting with a financial advisor can help you decide which investments to pursue and create a plan for managing your growing income.

","

Tips for Financial Planning

","$3d","

Photo credit: ©iStock.com/shapecharge, ©iStock.com/Moon Safari, ©iStock.com/FreshSplash

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Financial planning resources can provide a structured approach to help manage your finances effectively. From books and workshops to online calculators and budgeting apps, these tools are designed to meet the needs of individuals at every stage of their financial journey. The key to maximizing their potential lies in selecting resources that align with your […]

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","

What Are Financial Planning Resources?

","

Financial planning resources are popular tools that are designed to address the specific needs of individuals and organizations aiming to manage their finances efficiently.

","

Individuals might start out with books authored by financial experts. These can offer a general understanding of financial principles and practices. As their understanding grows, personal finance workshops and personalized consultations with financial advisors can offer additional insights into effective income management and debt reduction strategies.

","

Financial planning resources today have significantly expanded to include advanced online calculators that can help you estimate mortgage payments or retirement savings projections.

","

Selecting financial planning resources that align with your unique financial goals and circumstances is important. This personalized approach enables more effective and targeted planning, allowing you to build a financial planning toolkit that is tailored for your finances.

","

How Financial Planning Resources Can Help You

","

Here are four common areas that financial planning tools can help you with:

","

Budgeting: A financial planning tool can assist with budgeting by allowing you to track income and expenses, set spending limits and savings goals, and generate reports and visualizations to identify areas for improvement or overspending. This can help you get a comprehensive overview of your financial health and help you make informed decisions to reach your budgeting goals.

","$50","

Financial Planning Software and Tools

","

Financial planning tools play an important role in promoting financial literacy. These are widely considered educational resources that typically offer interactive features and personalized guidance that can help users make informed decisions about budgeting, investing and managing their finances.

","

When choosing a financial tool, you should consider your personal financial circumstances and objectives. Your financial goals and specific circumstances, for example, may differ from the general estimates that a tool can offer you.

","

Furthermore, you should evaluate the quality of the financial planning resource before using it. With an online financial education program, for example, you should consider several factors to ensure the program’s value and credibility. These can include regional accreditation and the involvement of financial experts in course development. Moreover, positive user reviews and a curriculum that stays abreast of the latest financial trends are also important.

","

Free Educational Resources

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If you’re looking for financial planning resources, here are three that you should consider:

","

SEC’s Website Resources

","

The Securities and Exchange Commission (SEC) offers a suite of resources that can help you with different financial needs. Their platform, Investor.gov, offer investor alerts, bulletins and tools (such as the investment calculator) to help you estimate potential investment growth. These tools are non-promissory and designed to help guide your financial decisions.

","

TIAA Insights

","

TIAA offers a wide range of tools, articles and webinars to help individuals make informed financial decisions. These cover retirement planning, investment strategies, budgeting and financial wellness. Articles, for example, cover topics like the impact of inflation on retirement savings. And webinars can guide you on different retirement strategies. The Retirement Advisor tool can also help you create personalized retirement plans.

","

FDIC Identity Protection

","

The Federal Deposit Insurance Corporation (FDIC) offers educational resources to help protect you from identity theft and fraud. Through real-life anecdotes and hypothetical scenarios, the FDIC’s ‘Consumer News’ and the “FDIC Consumer Assistance & Information” page provide actionable advice on securing personal financial information.

","

Bottom Line

","

","

Financial planning resources are essential tools that help individuals at various stages of financial literacy to manage their finances effectively. From budgeting apps to retirement calculators, articles and webinars, these tools provide guidance to help you make informed financial decisions for wealth creation and preservation.

","

Tips for Financial Planning

","$51","

Photo credit: ©iStock.com/BioletaStoimenova, ©iStock.com/shapecharge, ©iStock.com/Motortion

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Financial planning planning is a proactive approach to managing your finances and achieving long-term financial goals. By establishing a comprehensive plan, you can effectively allocate resources, prepare for significant life events and make informed decisions that support your overall financial well-being. Whether you’re saving for retirement, funding education expenses, or building an emergency fund, a […]

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","

If you need help with your financial plan, connect with a financial advisor and see how they can potentially help.

","

What Is Financial Planning?

","

Imagine you’re planning a cross-country road trip. Financial planning will help you map out your budget for expenses so that you can save enough to reach your destination safely and comfortably.

","

The planning process typically involves a comprehensive evaluation of an individual’s current financial situation, future expectations and objectives. It then calls for the development and implementation of a personalized plan to meet those goals and mitigate potential risks.

","

A financial plan may address budgeting, debt management, savings and investments and retirement planning, among financial needs. A well-structured financial plan not only focuses on accumulating wealth but also safeguards against unforeseen expenses and economic downturns.

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Taking the time to create a financial plan can offer numerous benefits, such as achieving financial stability, reducing stress and securing a comfortable future. But, overlooking a financial plan could have financial consequences that result in your inability to meet your goals.

","

10 Personal Financial Planning Tips to Live By

","

","

Here are 10 tips to help you create a financial plan, and hopefully, improve your financial outlook:

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1. Set Financial Goals

","

Setting clear and specific financial goals is the foundation of effective personal financial planning. It provides direction and purpose to an individual’s financial decisions and actions. Financial goals can be diverse and tailored to an individual’s unique circumstances and aspirations. Short-term goals may include saving for a down payment on a car, paying off credit card debt or saving for a home. Long-term goals may encompass objectives such as saving for a child’s college education, buying a home, starting a business, or accumulating a substantial retirement nest egg.

","

2. Make a Budget That You Can Follow

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When creating a budget, it’s important to be realistic. An overly restrictive budget that doesn’t allow for any flexibility or enjoyment can be challenging to stick to and may lead to frustration and abandonment of the budget altogether. Instead, aim for a balanced approach that allows for some discretionary spending while still prioritizing your financial goals and obligations.

","

To create a budget, start by tracking your income from all sources, such as your salary, investments or rental income. Next, list all your expenses, including fixed costs like rent or mortgage payments, as well as variable expenses like groceries, entertainment and discretionary spending. Categorize your expenses to gain a clear picture of where your money is going.

","

Compare your income and expenses to ensure that your spending aligns with your income. Then, adjust as necessary to avoid overspending and achieve your financial goals. Remember to regularly review and adjust your budget as your circumstances change. Life events like getting a raise, starting a family, or moving to a new city can impact your income and expenses significantly. By keeping your budget up to date, you can ensure it remains a relevant and effective tool for managing your finances.

","

3. Build an Emergency Fund

","

An emergency fund is a crucial safety net designed to cover unexpected expenses, such as medical bills, car repairs or job loss. Financial experts generally recommend having an emergency fund that can cover three to six months’ worth of living expenses. Building an emergency fund can be achieved by automating savings through direct deposits or transfers from each paycheck into a dedicated savings account, or by allocating a portion of any windfalls or bonuses toward the fund.

","

Additionally, setting up a separate savings account specifically for the emergency fund can help prevent dipping into it for non-emergency expenses. Having an emergency fund not only provides peace of mind but also helps you avoid relying on high-interest debt during times of financial stress, which can further exacerbate financial challenges.

","

4. Save Early – and Often – for Retirement

","

Retirement planning should be a top priority at all stages of your career. By starting to save early and contributing consistently to retirement accounts, you can take advantage of compound interest and potentially accumulate a substantial nest egg for your golden years.

","

For example, a 21-year-old with no savings would only have to save just $360 per month in a 401(k) or IRA throughout their career in order to retire with more than $1 million by age 67. That’s also assuming a very conservative 5% annual rate of return (the S&P 500 averages around 10% per year). Meanwhile, someone who starts saving at age 30 would have to sock away $666 per month to retire with approximately the same amount.

","

It’s recommended to contribute at least 10-15% of one’s annual income toward retirement savings, adjusting this amount as necessary based on individual circumstances.

","

5. Avoid High-Interest Debt

","

High-interest debt, such as credit card balances, payday loans and high-interest rate personal loans can significantly hinder financial progress. Monthly debts payments can quickly eat away at your cashflow and keep you from saving and investing your money. Therefore, you should prioritize paying off high-interest debt as soon as possible, as the interest charges can accumulate rapidly and consume a substantial portion of one’s income.

","

6. Understand Opportunity Cost

","

Opportunity cost refers to the potential benefits or opportunities that are foregone when choosing one alternative over another. For example, choosing an overly conservative investing strategy may mean forgoing the higher returns that riskier investments, like growth stocks may offer. Similarly, using disposable income for a luxury purchase may mean sacrificing the opportunity to contribute to a retirement account or pay down debt.

","

7. Focus on Tax Savings

","

Effective tax planning is an integral part of personal financial planning. By taking advantage of available tax deductions, credits and strategies, you can potentially reduce your overall tax burden and retain a larger portion of their income. Resources like tax preparation software, online tax calculators, or consulting with a tax professional could help you identify opportunities for tax savings and ensure compliance with relevant tax laws and regulations.

","

Common tax-saving strategies include maximizing contributions to tax-advantaged retirement accounts, claiming eligible deductions and credits like the mortgage interest deduction or child tax credit, and timing income and expenses strategically.

","

8. Protect Your Assets

","

Protecting your assets and wealth by purchasing appropriate insurance policies (e.g., life, health, disability, and property insurance), implementing risk management strategies and diversifying your investments. Life insurance, for example, can provide financial protection for dependents, while health and disability insurance can safeguard against unexpected medical expenses or loss of income.

","

9. Make an Estate Plan

","

Estate planning is the process of determining how an individual’s assets and possessions will be distributed after their passing. A comprehensive estate plan typically includes a will, trusts, beneficiary designations and other legal documents that outline the person’s wishes regarding the distribution of their assets, as well as provisions for guardianship of minor children and end-of-life care.

","

Working with an estate planning attorney or financial advisor can help ensure that an estate plan is properly structured and compliant with relevant laws. Estate planning not only can ensure that your assets are distributed according to your wishes, but also helps minimize potential legal complications and tax implications for your beneficiaries.

","

10. Work With an Expert

","

Estate planning isn’t the only area of your financial plan that an expert can provide guidance on. A financial advisor, especially one who offers financial planning, can be a valuable resource as you set financial goals, build up your savings, invest for retirement and take other important financial steps.

","

Just keep in mind that not all advisors specialize in financial planning. Finding an advisor with either the CERTIFIED FINANCIAL PLANNER™ (CFP®) or chartered financial consultant (ChFC) designations ensures they are fiduciaries well-versed in the field of financial planning.

","

Bottom Line

","

","

By implementing these 10 personal financial planning tips, you can take more control of your finances, achieve your financial goals and potentially secure a stable and prosperous future. Remember, personal financial planning is an ongoing process that requires discipline, commitment and regular review to adapt to changing circumstances and evolving needs.

","

Other Financial Planning Tips

","$5f","

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