The Saying Goes “out with the old in with new”…..well, we’re half-way through a New Year and now is the perfect time to have a refresher on how to leave those old financial ways in the past. What are your financial goals? Remember to be realistic. You can tell anyone how financially solid you are, but only you truly know the financial mud tracks you’re making. I say financial mud tracks because one financial track usually leads to another, and if you look back you can see all your mistakes.
Your financial goals should be some in which you can accomplish or see results within at least a 1-year time frame; start small and then grow bigger from 1 year to 5-years, then to 10 years and so on and so forth. We are going to start small. Here is a list of five financial goals that you should try this year and watch how “financially fit” you become.
1. Take a look at your current financial situation and change it. Understanding where you are financially is the key to understanding where you need to be in the future. It’s important to write down all of your debts on a piece of paper or in a spreadsheet so you can see what needs to stay and what needs to go. Compare how much you are paying each month to your creditors, to how much disposable income you have. You should not be spending more than 35% of your income on bills. If you are, now is the perfect time to start paying down or off some creditors to reduce debt or become debt free.
2. Create a budget and stick to it. Budgeting is the next important goal; you will need a budget in order to be financially successful. Just because you have disposable income doesn’t mean you are in the best financial situation. You could very well be in debt because you spending cash fast not realizing where your money is. Most people see budgets as time-consuming and frustrating. But if you stay in a rotation, it will become routine and may not be so intimidating. Budgets can avoid additional fees such as late fees, overdraft fees, bounced checks and can even track due dates for your creditors.There are spreadsheets and apps you can download, such as “Moneywise” an app on the android market, that will allow you track all of your incoming cash and outgoing transactions.
3. Avoid new debt and know your credit score. From interest rates to refinancing for cheaper auto and mortgage payments with a lower interest rate, people are always mesmerized at how much more money they can save by having a better credit score. The only way to have a successful refinance is to have a healthy credit score. Make sure to pull your credit at least 2 times a year. It protects you from identity theft and it also keeps you aware of any fallacies that may be attacking your credit score. Penny stacking is always a fun task but after stacking so many the pile begins to curve than crash, that’s usually what happens with debt the more you stack eventually you will begin to curve than crash. If you want to know how to calculate and see if you’re in debt check your debt to income ratio. You can do this by adding up your recurring monthly debt and then divide it by your gross monthly income. If you’re over 35%, don’t panic, just begin paying down or off debt. Remember when paying off debt, always negotiate. Some companies offer early pay off prices…take it! It’s much cheaper than paying until the end of the term, which equates more in interest. You can also check your debt to income ratio by visiting this website: http://www.bankrate.com/calculators/mortgages/ratio-debt-calculator.aspx
4. Save, Save, Save. Easier said than done, right? The eternal question is “How can you save if you live from paycheck to paycheck? Start small. If your check is $422.63, save the $2.63. You won’t miss it…and trust me, it adds up. Always save to the nearest whole dollar. If your check is $1163.44, save either $3.44 or $13.44. Never include bonuses as income, even if you see them every year, save it. Always analyze your bills…check for what can be eliminated. Know what you’re paying for, with the services being provided because it could be cheaper with another provider. Before you make changes, always call and negotiate. You never know what you can save on unless you call and ask. Have you checked out the coupons in your local paper? When you’re attempting to save, the main goal is to sacrifice, what you can’t buy now you will be able to afford later.
5. Start on your future financial goals. Investing in your future is the long-term goal, your financial security in the future is the reason for these goals in the first place. You need to invest as much as possible in your financial future so you can make sure your “financially fit” when it’s time to hang up your profession. Start now by investing in your employer’s 401(k) plan start small with a minor 5% percent you won’t miss it, Invest in 401(k) whether your employer matches it or not. It’s money that can’t be spent easily and you will gain interest for each year it’s in the account. You can also invest in an IRA if your employer doesn’t offer 401(k). Visit your credit union or bank and ask them what programs they would suggest for your income, that’s what they are there for to help you financially as their member. If you feel that the amounts aren’t affordable at the moment….open up a simple savings account without an ATM card. Keep this account in a separate bank and really do your best to keep your hands off of that money. Once you have enough to enroll in an IRA, wire the money to the new account and you are well on your way.
Most importantly understand this is a process and if you follow these five short term goals you will have a financially fit 2016 and will be creating the stepping stone for a financially fit future.