I have never met anyone who is completely satisfied with their personal finances for one reason or another. It is human nature to want “more” of something, whether it is more money, more financial stability, more social capital, more free time, etc. The list goes on and on…
But then that is where many people stop. They get stuck in the “zone of dissatisfaction” and don’t take the time to educate themselves on how they can make changes that will positively affect their ability to achieve their financial and life goals. Or they tried something that didn’t grow their wealth before, experience a hard set-back, and feel that nothing will ever change, so why bother trying anything else.
This is a New Year, and a perfect time for you to try a few simple steps that will likely cause a positive shift in your attitude, your habits, and motivation for change. Empower yourself to make better progress on your money goals this year with a few of these simple steps:
1: Make a written inventory of your assets and where they are located.
Assess where things currently stand when it comes to your personal finances. Create an updated list of all your assets, their current value, and know exactly where the assets are located. Are they in the bank, in a security box, somewhere at home, in another state, with an old employer’s retirement plan? Do you have part ownership in a privately-held business or assets held in a trust? What are the market values of any property you own? Are there other members of your family who should be aware of this list?
2: Look at the debts you may have.
Now that you are aware of what you own, what about what you owe? What are the current balances owed, interest rates, and payment schedules of your credit cards, student loans, mortgage, or other any other personal or business debt?
Plan to pay off debts with higher interest rates faster than lower interest rate debts. Make a personal goal of building or maintaining a good credit score by paying bills on time every month and stop making purchases on your credit cards that you cannot pay off each month.
With technology these days the two steps above are not very time-consuming. Once you have this info in one place, first congratulate yourself for getting organized! You essentially have helped yourself put together what we financial planners call a “statement of financial position”, or a “personal balance sheet.”
3: Find out where your money is coming from and going out to.
Next prepare a written or electronic spreadsheet of the weekly or monthly money that you are currently receiving, and what money you are currently spending on a weekly/monthly basis. Free apps like Mint can help you do this, but there is something to good old-fashion paper or excel spreadsheets that I really like. Think about how you might change certain lifestyles that to help you save more money on a regular basis. Update the list at least weekly to keep yourself focused on any savings goals.
4: Make sure that your investment assets are growing over time.
Are your investment assets (i.e. stock, 401k/403b, IRAs) getting some kind of rate of return, based on the risks you are willing to take? Meet with a financial planner to help you through this process and develop a plan.
If you have not started investing, open up and start contributing to an Individual Retirement Account (preferably a Roth IRA if your income qualifies) to help build savings for retirement. Also, take advantage of any company benefits through your job such as an employer match to a retirement plan. There are tons of great resources available and qualified financial professionals to help you learn about investing in the stock market.
5: Double check that your assets are insured properly
Having the right insurance coverage isn’t typically a goal that most people express, but financial stability for themselves and their family usually is! If you own real estate, it could be the biggest asset you own, so make sure both your home’s structure and the property inside it is properly insured against loss. If you are employed or a breadwinner in the family, then having income-protection, life insurance, and possibly long-term care insurance could also be very important. Unfortunate events happen all the time, and proper insurance planning goes a long way in helping you maintain or replace your financial assets if you experience a loss.
Be more strategic this year by following these initial steps towards a better financial plan. For more planning tips, watch this recent interview, and book a consultation appointment with us for more personalized help.