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The CFO Guide To Personal Finance

Feb 25, 2011

CFOs spend their time helping companies build value and there are many tried and tested ways to build wealth in an organization.  Here are 6 ideas from the world of Corporate Finance to help build personal wealth.

  1. Match your Loan to Asset Quality How can you build wealth? Take a look at your mortgage. Most homeowners take out a 30 year mortgage, but the true cost of making payments over that length of time can be paying nearly two-and-a-half times the purchase price of the home. A 15-year mortgage instead of a 30-year mortgage can potentially save you large sums of money and help you build wealth.
     
  2. Maintain Internal Controls  You have to be involved in your day-to-day family finances, or you may be putting yourself at risk. If you let your spouse pay the bills and manage the bank accounts, what happens if your spouse dies or becomes seriously ill or if you divorce? Don't turn financial affairs over to a broker or financial consultant without staying informed about investment decisions.
  3. Effective Cost Management All those coffees and lunches are like small leaks in your wallet.  If you're ever going to accumulate wealth, you must control spending leaks. You know what happens when small leaks are left to grow. Continuously review your expenses for potential savings.
  4. A Strategic Plan Building wealth requires a financial plan. Write down vivid goals like early retirement, paying off your mortgage.  You are far more likely to get there if you have a map.
  5. Debt Management  Some debt can help you, but Credit cards are dangerous and you can quickly end up running in place as you pay interest but never bite into principal.  A $1,200 wardrobe can end up costing you $2,400, but you'll never realize it because the true cost is hidden in your credit card payments. Try to pay cash and stay away from credit card debt if you want to accumulate wealth. Have a 24 hour rule on major purchases – chances are you will decide not to go ahead if you wait a day.
  6. Not having an Exit Strategy It’s easy to postpone saving for retirement, but the earlier you start the faster you will accumulate accumulate wealth and save for retirement. Consider that the amount you need to save will be much lower if you start now and give your earnings time to compound. If you're over 40 and you're behind on your retirement savings, you'll have to save much larger sums to ever catch up to where you should be. Start saving early, and save at least 10 to 15% of your income, and you'll be well on your way to accumulating wealth. More than half of all workers will end up cashing out their 401Ks when they change jobs. Still others will take out loans, permanently reducing the retirement fund they could have built up.

More from David Kirkup…

About the Author

David has over two and a half decades of business experience and is a proven financial management expert. Working in Europe and the USA, David has served as Divisional CFO at a number of Fortune 500 corporations: including Reuters, Marsh & McClennan, Zurich Insurance and ADP as well as numerous small and mid size companies. As part owner of a small software company, he was heavily involved in the marketing efforts and ultimate sale of the company. As CFO with a national PEO firm he dealt with the credit and financial issues facing hundreds of small business clients. David also spent 5 years in Bermuda managing captive insurance companies.

View David’s Personal Website

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