There are some ideas that never vary. When discussing financial planning, the objective is to maximize wealth. Maximizing wealth does not mean a person has to become rich first. It also can be achieved by getting a better return on any savings or investments a person may own.

This is done by making the most of any investment dollar, by comparing interest rates on savings accounts and by paying down debt. The less money used to reduce debt is more money that can earn interest.

Another objective of financial planning is to manage spending. Most people spend most of their income every month, leaving very little for savings. So it is important spending is done wisely with the intent there is some long-term gain for every dollar lost.

Even when buying groceries, buy those items that contribute to the long-term health of the family and avoid a lot of empty calories. Make every dollar count.

Impulse buying rarely has any long-term gain and thwarts the family budget. If a person can reduce spending by as little as 5 percent or 10 percent, that’s like getting a 5- to 10-percent raise.

In trying to develop a sound financial plan, it is best to start with a budget. Although there are many computer programs that can make this easy, budgeting has been done long before computers were invented and it is not a hard thing to do with just pencil and paper.

List the income received and determine where that income will be spent. That is all a budget is. If an expenditure is desired but does not fit within the budget, it should not be bought.

If an expenditure is required but does not fit within the budget, then the expense must be offset by reduced spending somewhere else. Control over money is a big part of financial planning.

Not making an effective financial plan can lead to consequences that could be felt for many years to come. Mounting debts, poor health due to increased stress and a poorer standard of living are just some of the results of poor financial planning.

Creditors must be paid, collection agencies could come knocking on the front door and personal property could be seized to repay unpaid debt. In addition, a person’s credit score can be severely impacted.

Interest charged on car loans or home loans are based on a person’s credit score. By having a high credit score, lending becomes easier and the interest rate charged might be lower than that charged to other people. An excellent credit score is above 800. A score above 750 is good.

Knowing the credit score in advance of taking out a loan can reduce the surprise of having a loan rejected. If the score is too low, then it is important to pay off debt, develop a savings program and manage money effectively to raise the score.

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If the loan you choose has a fixed interest rate, the amount you pay each month will stay the same, unless you are advised otherwise. If you opt for a variable rate loan, you will need to be prepared for the monthly amount to change this could mean that it goes up or down but it’s an important consideration when it comes to budgeting your finances.

There are lots of different companies offering loans, but broadly speaking they fall into two categories: secured (sometimes known as a homeowner loan) and unsecured (often referred to as a personal loan). Secured loans are only available to homeowners who have enough equity in their property to secure against the debt. Unsecured loans are available to anyone who meets the lender’s criteria.

Things to consider before getting a loan

There are lots of lenders offering loans. There are a few things to look out for when comparing loans, working out the cost of each one and choosing the right one for you. These are:

Don’t just look at the interest -

If you’re comparing two loans with the same APR, but which are repayable over different lengths of time, the total cost will be different. The APR includes the total interest and other charges, per year. So a loan you have a longer number of years will mean more interest paid in total over the course of the loan, even though the interest rates appear the same.

Make sure you can afford the repayments -

The APR covers the cost of the interest and charges, but what is the actual amount you’ll be repaying each month? And is the interest rate fixed or variable? If it’s variable this means it’s subject to change and can go up as well as down.

Find out what the monthly repayment cost will be. If it’s more than you feel comfortable paying, you could think about extending the length of time you take to repay it. This will give you a lower monthly payment, but might cost you more overall as you’ll be paying more interest.

Be aware of all the charges –

There may be more to the cost of a loan than the interest. Check if there is a penalty if you choose to repay the loan earlier than the agreed term. Sometimes you can incur a hefty interest charge or admin fee on the last month’s payment. And, if you’re late paying, because a direct debit bounces for example, you may be charged by the loan company and your bank. So be sure you know about all the potential charges up front.

Think about how you’ll pay if your circumstances change -

Most loan providers offer optional insurance to cover your payments in the event of you losing your job and being unable to continue paying. This insurance will add to the overall cost of your loan, but give you some protection in the event that your circumstances change. If you were unable to work through illness, or you lost your job, would you still be able to pay? If you don’t think you would, you might want to consider insurance, but it’s entirely up to you. You should never feel pressured into taking on any insurance.

Find a reputable lender

When looking for loans, use a comparison website, or talk to your bank or an independent financial adviser. Be extremely cautious of loans offered by companies you have never heard of, and always do a little research to ensure they are reputable. Be on your guard with emails offering financial products, even if they appear to be from a reputable lender. If they ask for any personal information, or you suspect they are not genuine, report it to the lender and/or delete it immediately.

Before taking out any kind of loan, check that the provider is registered with the Money Advice Service – this means you will be able to get support if you need to make a complaint.

Types of loan

As the name implies, these are loans that are ‘secured’ on your home. They are only available to people who own, or have a mortgage on, their home and who have enough equity in the property to secure against the amount they want to borrow. In taking a secured loan, you are agreeing your home can be used as security against the debt and could be taken as full or part repayment of the debt if you were unable to make the agreed payments. In straightforward terms, if you miss payments and slip into arrears, your home could be repossessed.

This option won’t be available to everyone who owns, or has a mortgage on their home, as the lender will need to be sure that there is enough equity in the property to cover the debt in the event of non-payment.
Some lenders may give a better interest rate on a secured loan, especially if you are looking at borrowing more than 15,000 but you should compare all types of loan from a range of lenders before taking one, and think carefully about the risk of losing your home if you were unable to pay for any reason.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Unsecured, or personal loans

These types of loan are widely available from a choice of lenders and are most commonly for between 1,000 and 25,000. They are not ‘secured’ against your home, and therefore could be suitable for a wider range of people and circumstances. The amount of interest you will pay depends on the length of time you want to spread the repayments over, the amount you’re borrowing, and can sometimes be affected by your credit score or financial history.

Student loans

Student loans are offered by the Government to full-time students, to help with the cost of higher education.

Debt management is ideally suitable for those who have un-secured debts of over £3000 and less than £15,000.

Lower affordable payments.

Under a debt management plan you agree to make a set monthly affordable payment into the plan and you creditors (the people or companies you owe money too) agree to make concessions like to freeze or eliminate the interest payments and to accept lower payment.

Your debt management company will deal with all of your creditors (this may be un-secured loan companies, hire purchase, credit card providers and companies etc) and they will handle all the negotiations and paperwork on your behalf.

You pay the set amount agreed to the debt management company and in turn the debt management company pays your creditors and acts as an intermediary between yourself and the people you owe money to.

Many people find that this debt management process helps to remove the emotional stress out of having to deal with creditors directly and often find comfort in the support and structure that a debt management plan provides.

Things you should consider about a debt management plan are:

* You may end up paying back more over the period of the plan.

* The plan may extend the period from which you have to make payments.

* A debt management plan may affect your credit rating.

* Your creditors may charge extra fees and charges as part of the plan.

Other options :

Depending on your circumstances you may find that an IVA is a more suitable arrangement. However, we can disuses this with you in more detail to provide the correct debt solution for you.

It’s important to note that the sooner you act, the more positive your situation will be for you.

For a person, it is generally advisable for them to hold at least 10% of their income in cash in the bank. This is not for investment, it is cash for long term savings. No risk should be attached to this savings. This is retirement money. In UK many people who invested in pensions have seen the value of the pension go down or disappear because of the financial crisis.

A business may decide to hold at least some of its assets in the form of cash in order to meet day to day commitments a business requires a certain amount of cash. Payments in respect of wages, overheads, goods purchased and so on must be made at the due dates. Cash is the lifeblood of a business. Unless it circulates through the business and is available for the payment of maturing obligations, the survival of the business must have sufficient cash to pay its debts when they fall due.

When cash flows are uncertain for any reason it would be prudent to hold a balance of cash. A customer which owes a large sum to the business may be in financial difficulties. In this situation the business can retain its capacity to meet its obligations by holding a cash balance. Similarly if there is some uncertainty concerning future outlays, a cash balance will be required.

Having cash puts you in a position to exploit profitable opportunities when they arise. A business may be able to acquire a competitor business which suddenly becomes available at an attractive price. Holding Cash has an opportunity cost for the business which must be taken into account. Thus when evaluating the potential returns from holding cash for speculative purposes, the cost of foregone investment opportunities must also be considered.

If a business is able to borrow quickly at a favorable rate then the amount of cash it needs to hold can be reduced.

My question is, is it o.k to borrow for a wedding as it is a once in a lifetime occasion or should we live with the proper rules of borrowing, whereby we do not take loans for anything other than property and education? Should we include weddings as a long term profitable investment or should we look at it as a liability? I know there will be many school of thoughts to this.

I personally think it is o.k, otherwise the lady in the marriage will live her entire life thinking she did not have a ‘proper’ wedding, this will cost the guy more on holidays and anniversary celebrations through out the course of the marriage. I also think getting married and being in marriage is an investment but needs to be carefully planned, a working couple can often earn and have a better choice at investing in property. Lets face it a guy earning £30k a year as a bachelor will probably spend the most of it on entertainment, where else if he is in a marriage he is more likely to think about savings and investments.