July 17, 2014
In today’s economic climate, getting your financial house in order is more important than ever. What you do now will dictate the stability of your financial future.
It is important to know what you want for the future. Setting goals now and taking steps to achieve them will help you secure a stable financial foundation. As shared by Kiplinger:
For example, your goals may be “I want to have $250,000 in my retirement plan by age 50” or “ We want to retire to Florida in fifteen years with enough money to buy a house in Jacksonville and enough income to take a month-long, international vacation every year”. Once you have financial goals that you can put a future price on, the price of your goals can then be translated into a savings action plan that you can start today.
How often do you open your mail? While most people don’t like to open the mail because they know that bill statements are in the mail pile, it’s actually better that you do so sooner than later. Don’t put off opening your bills; open your bills the day they arrive! Knowing what you owe will help you budget your money better as you take steps to achieving the financial goals you set in Step #1. When it’s time to pay a bill, you will be better prepared and feel good that you were able to pay it on time.
Doing so is a critical component of getting your financial house in order. Every payment that you make is date stamped and, in today’s digital world, it is also automatically reported. In the majority of cases, even if you pay your credit card bill just one day late, it will be reflected on your credit report as a late payment and will impact your credit score. Keeping your credit report in good standing is important for building a solid financial future. If you have a busy schedule and lots of demands between work and family, then you can set up automatic payments for your bills to ensure they are paid on time.
In today’s technology-based world, identity theft is on the rise. It is important to review all of your creditor statements for unauthorized charges and dispute them right away. Additionally, you should inspect your bank account statements to ensure that you don’t have unauthorized transactions or fees deducted from your account. Be vigilant about managing your money and protecting your identity!
In order to avoid overdraft fees, it is important to record every transaction related to your bank account. You can do this via a paper journal in your physical checkbook or an online money management tool. There are some very good tools available on the Internet that can synchronize with your bank account. It’s important that you record all of your ATM withdrawals, checks and debited purchases (big and small) when managing your bank account. Remember, if you incur an overdraft fee for a check you have written or a check made by phone electronic payment, you will actually get charged twice — once by your financial institution and once by the business you are paying. Overdraft charges can have a snowball effect and can get out of control quickly so you want to do all you can to avoid them.
Credit cards are the leading cause of debt today. At Largo Financial Services, our financial advisors strongly recommend that our clients not spend and use credit cards at a level where they are maxed out or over the credit limit. A very good strategy to manage your credit cards is for you to not charge more than half of your credit line, and for you to pay your monthly payment on time. If you spend more than half, you risk not being able to pay the balance which could lead to financial ruin. While you may not be in a position to do so now, as you are working to get your financial house in order, keep in mind that you will ultimately want to be able to pay more than the minimum monthly payment, and then get to the point where you can pay the entire balance due on the card each month.
While many people take the time to set financial goals, many don’t feel like they will ever reach them. Why? Because they have not established a budget that works for them and that they are committed to. In today’s busy world, it is very easy to overspend. When you break a $20 bill, do you actually remember what happened to the change? Many people can’t recall how they spent the change. It is really important to keep track of where you are spending your money by establishing a budget, tracking your expenses, and doing a comparison between the two (planned budget vs. actual spending). When you see it on paper, you’ll realize how much you are spending and when you need to cut back.
Accidents and emergencies can happen in the blink of an eye, and that’s why it’s critical for you to establish an emergency fund. Putting a small amount of money away each month can make your life easier should the unexpected happen. Having an emergency fund also prevents you from having to dip into your savings account. Remember, your savings account at the bank is tied to a short term goal you have (i.e. a vacation). Your savings account and your emergency fund are two separate things. It’s recommended that you build up to six to nine months of living expenses in your emergency fund. It may take you some time to do so, but it’s better to start in order to be prepared for the unexpected expense (i.e. hot water heater breaks, car needs major repairs, etc.).
Everyone needs life insurance, health insurance, homeowner’s (or renter’s) insurance, and car insurance if you drive a vehicle. The challenge is that there are millions of people who are either uninsured or grossly underinsured. Insurance can be a complicated issue for a lot of people but it doesn’t have to be. At Largo Financial Services, we explain financial matters in plain language to our clients as we educate them. If you are uncertain as to whether you have the right type of protection for your family or your assets, then give us a call to schedule a free financial assessment.
Research has shown that people are more successful in achieving their financial goals if they are accountable to someone. Identify an accountability partner – someone who also has financial goals and is committed to changing his or her habits to accomplish them. This person may be your spouse, a relative, or close friend. The key is that you both must be willing to lay everything out on the table, commit to your goals, and be willing to call the other out when financial decision-making and spending behaviors do not align with the goals. Your financial advisor is someone who can hold you accountable on a monthly basis or other frequency based on how often you speak with him/her; however, having an accountability partner to talk with week-to-week can be very beneficial.