your personal finances been a bit of a challenge this past
year? According to In2M Corporation’s financial
fitness survey conducted this past fall, you aren’t
Nearly 90 percent of
survey respondents are moderately to very concerned about their ability
to meet future financial obligations for major items, such as education
of respondents said their financial situation is about the same as (40
percent) or worse than (23 percent) when compared to last year.
Sixty-six percent stated
their approach to financial management is either reactive or simply total
avoidance. Only a small 34 percent follow a plan of action.
Here are 9 suggestions
that you may want to consider for this next year. Now is the time to get
control of your finances, and take that first step down the path to financial
fitness. Why not start this next year off on the right financial foot?
than you make.
Just like you can’t loose weight if you take in more calories than
you burn… you can’t save money if you spend more than you bring
in. Spending less than you make on a consistent basis is the key to reaching
financial fitness and financial stability. You can’t increase your
savings, make investments, reduce debt or even make wise spending decisions
if you’re consistently overspending your income each month. Forty nine
percent of respondents, to In2M’s financial fitness survey, said they
rarely, if ever, use a budget to manage household spending. No wonder they
have so many challenges with overspending, increasing debt and lack of savings.
together a spending plan and make it one that works for you
and your family!
For a step-by-step
process of how to make an effective spending plan, look in
the book Money
for Life. This book walks you through
the process and explain the reason behind each step, in a way
that anyone can understand. If you’d rather go the paperless
route, Mvelopes® Personal will
help you create an online spending plan.
Save more… at
least 10% of your income.
Ever hear of the theory of paying yourself first? That’s basically
what this is. If you make it a habit to pull out 10% for savings and investments
for retirement, before you pay any other bills, you are actively working
towards a better financial future for yourself. This 10% can include your
401k account if you have one, but be sure you are maximizing that option!
It’s also wise to put an additional amount into savings after your
401k investment is made. Put this money into a money market account, money
market fund or CD if possible, so that you get a higher interest rate. According
to In2M’s financial fitness survey conducted this past fall, 48 percent
of respondents saved nothing in the past 6 months and 31 percent saved less
than 10 percent of their income. Don’t be one of the statistics, take
action today and start saving!
Do a reality check to ensure you are on the right track. Your net worth should
be increasing each year, even if it is just by a small amount. The exercise
of calculating your net worth can be very valuable as well… people
often discover accounts, investments, etc that they have forgotten about,
or need to update.
If your net worth
has decreased from the year before, take an honest candid look at where you
can make adjustments to improve these numbers. Consider accelerated debt
reduction. Consider increased savings. Even consider canceling every credit
card you have if it means that you stop overspending and start saving. Be
proactive in your efforts to get financially fit!
Start an emergency
If you don’t already have an emergency fund, start one today! Your
emergency fund should have a minimum of 3 months worth of expenses in it.
This is your emergency money for a job loss, emergency repair, medical expense,
etc. Keep these funds in a money market account or other high interest, easily
accessible account. If ever you have the misfortune of an unexpected job
loss, unexpected car repair, unexpected appliance problem… you will
be far more prepared to weather the storm if you know you have a little breathing
room on your finances, thanks to your emergency fund! That peace of mind
makes all the difference.
Use the debt roll down principle to quickly reduce your debt. Make a list
of all your debts and prioritize them in order of interest (highest to lowest)
or in order of the number of payments till payoff (fewest payments at the
top). Once your first debt is paid off, roll that payment amount into the
next debt on your list. Follow the same procedure when the second debt is
paid off. You will not only reduce the number of years you will have payments,
but you will also save thousands in interest if you follow this principle
until you are completely debt free.
cards for the benefits, not the penalties.
If you use a credit card, only do so when you know that you already have
the funds set aside to pay the balance completely when the bill arrives.
Do not carry a balance on your card! It wastes money and ends up costing
you a fortune in interest and finance charges. Thirty Eight percent of respondents
to In2m’s Financial Fitness Survey stated that they never pay off their
balance, and 33% only do so part of the time. Are those airline miles really
worth it? Not if you aren’t paying the card off every month!
Make sure you
have adequate insurance.
We’re talking home, life, disability, health, property and even auto.
Not too many other things will matter if you have no fire insurance and your
house burns down. Thirty Five percent of respondents to In2M’s Financial
Fitness Survey stated that they either knew they had too little insurance
or that they weren’t sure what their coverage was. Make sure that you,
and your family, are covered adequately!
Create or update
your estate plan and/or your will.
Whether you are single, married, divorced, kids or no kids… you need
to have the proper documents to make your wishes known.
Update your beneficiary
info on your retirement accounts, insurance, etc.
Specify money that
you want to give to charity through a trust or gift exclusion.
When preparing a
will reference an addendum in the will where you list who will get your
various assets and personal property.
Make sure all language
is clear and as specific as possible so that your wishes can be carried
If you have any 401k accounts from former employers, be sure you roll them
over into an account that you control. Consolidation can also make your retirement
accounts easier to manage, however, in doing so make sure you don’t
jeopardize the diversification.
Take advantage of the New
Year and get on the path to financial fitness!
By Steven B. Smith,
author of Money for Life – Budgeting Success and Financial Fitness
in Just 12 Weeks and the Money for Life Success Planner – A 12-Week
Companion to Achieve Financial Fitness (Available at www.mvelopes.com).
To achieve financial freedom, ideas such as: listening to good advice, learning how to make a budget, understanding credit repair possibilities, avoiding the scams, and generally becoming more knowledgeable of the credit card business, can all play a role in eliminating credit card and other debt. There is A smarter way to manage your money.