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
avoidance. Only a small 34 percent follow a plan of action.
are 9 suggestions
that you may want to consider for this next year. Now is the time to
control of your finances, and take that first step down the path to
fitness. Why not start this next year off on the right financial foot?
- Spend less
than you make.
Just like you can’t loose weight if you take in more calories
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
financial fitness and financial stability. You can’t increase
savings, make investments, reduce debt or even make wise spending
if you’re consistently overspending your income each month.
percent of respondents, to In2M’s financial fitness survey,
rarely, if ever, use a budget to manage household spending. No wonder
have so many challenges with overspending, increasing debt and lack of
together a spending plan and make it one that works for you
and your family!
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
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
what this is. If you make it a habit to pull out 10% for savings and
for retirement, before you pay any other bills, you are actively
towards a better financial future for yourself. This 10% can include
401k account if you have one, but be sure you are maximizing that
It’s also wise to put an additional amount into savings after
401k investment is made. Put this money into a money market account,
market fund or CD if possible, so that you get a higher interest rate.
to In2M’s financial fitness survey conducted this past fall,
of respondents saved nothing in the past 6 months and 31 percent saved
than 10 percent of their income. Don’t be one of the
action today and start saving!
Do a reality check to ensure you are on the right track. Your net worth
be increasing each year, even if it is just by a small amount. The
of calculating your net worth can be very valuable as well…
often discover accounts, investments, etc that they have forgotten
or need to update.
If your net worth
has decreased from the year before, take an honest candid look at where
can make adjustments to improve these numbers. Consider accelerated
reduction. Consider increased savings. Even consider canceling every
card you have if it means that you stop overspending and start saving.
proactive in your efforts to get financially fit!
- Start an emergency
If you don’t already have an emergency fund, start one today!
emergency fund should have a minimum of 3 months worth of expenses in
This is your emergency money for a job loss, emergency repair, medical
etc. Keep these funds in a money market account or other high interest,
accessible account. If ever you have the misfortune of an unexpected
loss, unexpected car repair, unexpected appliance problem…
be far more prepared to weather the storm if you know you have a little
room on your finances, thanks to your emergency fund! That peace of
makes all the difference.
Use the debt roll down principle to quickly reduce your debt. Make a
of all your debts and prioritize them in order of interest (highest to
or in order of the number of payments till payoff (fewest payments at
top). Once your first debt is paid off, roll that payment amount into
next debt on your list. Follow the same procedure when the second debt
paid off. You will not only reduce the number of years you will have
but you will also save thousands in interest if you follow this
until you are completely debt free.
- Use credit
cards for the benefits, not the penalties.
If you use a credit card, only do so when you know that you already
the funds set aside to pay the balance completely when the bill
Do not carry a balance on your card! It wastes money and ends up
you a fortune in interest and finance charges. Thirty Eight percent of
to In2m’s Financial Fitness Survey stated that they never pay
balance, and 33% only do so part of the time. Are those airline miles
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
Not too many other things will matter if you have no fire insurance and
house burns down. Thirty Five percent of respondents to
Fitness Survey stated that they either knew they had too little
or that they weren’t sure what their coverage was. Make sure
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…
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
over into an account that you control. Consolidation can also make your
accounts easier to manage, however, in doing so make sure you
jeopardize the diversification.
advantage of the New
Year and get on the path to financial fitness!
Steven B. Smith,
author of Money for Life – Budgeting Success and Financial
in Just 12 Weeks and the Money for Life Success Planner – A
Companion to Achieve Financial Fitness (Available at www.mvelopes.com).