The Best Financial Advice for the New Year

                                     

Millions of consumers make New Year resolutions to lose weight, get a new job or improve their financial status. However, I believe improving your finances is one of the most important goals consumers need to achieve and it needs to become a daily habit.

A New Year is a time to reflect on the previous years and examine what you did right and what you did wrong. Then develop a plan to make changes in your life in specific areas such as finances, career or health.

In order to be successful at creating and sticking to financial goals you have to think about why you created the goal, what you hope to achieve from the goal and if the goal will improve your life.

There is lots of great advice available to help you improve your financial status from friends, family, co-workers, and experts and on the internet. I use the rule that if at least three sources state the same thing it is probably true or works.

When reviewing finances create plans that are reasonable, that you know you can accomplish and that will improve your life for the better. The sooner you start the better off you will be.

You have to change your mindset when you make the decision to review and improve your finances. It will not easy – it will require discipline, accountability and sacrifice, but it will be beneficial to you in the future. This will require changing your thoughts, actions, behaviors and attitudes regarding money. Once you change your mindset, the rest is easy. However, this is usually the hardest part and where most people fail and revert back to their old financial habits. Here is the best advice to help you improve your finances in 2016.

1. Spend less. Track your spending for at least 14 days up to 30 days. Compare this with how much you earn, spend and owe. Make adjustments the following month and rate yourself on the improvements you made. Continue to do this until you are able to have at least 10% - 20% of your net income leftover each month. Think about how each purchase will affect your financial goals, your future, and your family. Categorize your spending. Online banking provides charts and graphs that categorize your spending so you can quickly see areas where you need to reduce spending.
2. Set goals. Set short-term and long-term financial goals that you want and know you can achieve such as homeownership, retirement age, home repairs, starting a business, annual vacation, college tuition etc. Start by creating an action plan to achieve smaller short-term goals then focus on larger long-term goals. When you meet with a financial professional share your financial goals to ensure they become part of your overall financial plan. You have to stick to achieving your goals and don’t give up no matter what. 
3. Analysis. Do an analysis on the products and services you purchase. Verify automatic renewal fees to ensure you still want or need the services. Cancel “gray or ghost charges” they you may have forgotten about, trial memberships, products that state call within X days to cancel, etc. Compare prices for service and ask about discounts and specials to find a less expensive plan for cell phone, cable, internet, utilities, credit cards, web hosting, email provider, insurance, childcare, etc.

4. Emergency Fund. Save more. Many people go into debt because they have no savings and are forced to use a credit card to pay for unexpected expenses. You will need a safety net to help you if any unexpected expense arises or you become unemployed. Create an emergency savings account to cover your bills and monthly expenses for at least 9-12 months.
5. Review retirement. Social security will not be enough to live on during retirement and you will need another source of income. Maximize contributions at least up to the percentage your employer matches. Rebalance your portfolio once a year to minimize losses and ensure you remain on target to reach your financial goals. You will need at least 20-30 times your salary in your account at age 65.
6. Pay down debt. Pay for most items with cash. Use credit for emergencies. Keep credit card balances at 20% or less of the credit limit. Send more than the minimum monthly payment for loans and credit cards.
7. Seek professional advice. Hire a lawyer, CPA, and financial advisor to help you set financial goals, effectively manage your finances, maximize your tax liability and lower your risk of audits and legal action.  
8. Insure. Purchase life, health and disability insurance. Review policies each year and ensure you have adequate coverage. Update beneficiary information yearly or when a life event occurs (birth of a child, divorce, death, etc.)
9. Withholdings. Review your withholding status. Adjust as needed based on life events (death, divorce, birth of a child, adoption, new job, reduced benefits, new business venture, etc.). Consult a CPA to find ways to reduce your tax liability.
10. Credit History. Order a copy of your credit reports every 12 months to check for any errors or accounts you may not be aware of. Fix any errors and setup payment plans for past due accounts.
11. Estate Planning. Setup an estate no matter what your income to ease the burden of handling your financial affairs when you die. Create a will and advanced medical directive. Create a trust to reduce estate taxes and clearly identify how, when, where and to whom you want your assets distributed.
12. Military Status. Read letters received from service providers or creditors when you return from active duty. Terminate your power of attorney when you return. Review state and federal laws that protect military from predatory or unethical business practices by debt collectors. Get current or past due bills and dispute errors to maintain your credit history. Utilize military resources to help get your finances back on track.

How to Create Your Financial Roadmap for 2014

                                                                            

Develop commitments for 2014 instead of making New Year’s resolutions. Many times resolutions are forgotten about after January 31^st.  By making commitments you will be more determined to achieve these goals because they will be things you want to achieve and need to achieve.  These commitment are things you can do throughout the year to improve your life.  

You can create one or more commitments you want to achieve for 2014.  Ideally try to create at least five commitments you plan to achieve in 2014.  You can meet all of your commitments by creating smaller goals for each commitment.  Once you achieve those, develop larger goals and develop a course of action to achieve them. Track your progress.  I develop a roadmap each year that is broken down into 6 month increments. I develop goals and a deadline for each goal.  Later I develop a course of action on how to achieve those goals. If I don’t meet a goal I just extend the deadline and add it to the next 6 month increment.

Make sure your commitments and goals are positive statements that will improve your life. A commitment should be similar to an affirmation, i.e. I will pay off my Visa bill by April 2014 instead of an uncertain or negative goal such as, and I hope I can pay off my Visa bill by April 2014.

One of the worst habits Americans have is getting into debt year after year.  Make 2014 your year to eliminate those bad spending habits and begin your path to financial freedom. Here are 12 Financial Commitments for 2014 that will improve your financial life, reduce stress, end fights regarding finances, and bring peace to your life.

1. Consult a professional.  Contact a financial advisor or financial planner to help you determine your financial goals, where you want to live, the age you want to retire and the lifestyle you would like to have when you retire.
2. Track. Track your spending for at least 14 days up to 30 days. Compare this with how much you earn, spend and owe.  Make adjustments the following month and rate yourself on the improvements you made. Continue to do this until you are able to effectively manage your finances. Pay with cash or your debit card instead of your credit card. 
3. Bundle products. If you have multiple insurance products with different companies contact each company and get a quote for bundling your products. 
4. Ask for discounts and specials. Companies always provide discounts or specials but do not always advertise them.  Every 3-6 months call each service provider and ask if they are offering any specials and what discounts they have available for the services you currently have.  Ask for competitor price matches.  
5. Trim Spending. Buy needs more often than wants. Find ways to reduce expenses to help pay down your debts. Reduce spending by 30%. 
6. Get insured. Make sure you have adequate health, auto, life, disability and long-term care insurance. Review policies and update your beneficiary information yearly. 
7. Withholdings. Review your withholding status. Adjust as needed based on life events (death, divorce, birth of a child, adoption, new job, reduced benefits, new business venture, etc.) 
8. Say no. Learn how to say no. Stop loaning money if you can’t afford. You cannot save the world. You must save yourself first. Even if you can afford it, the best way to help someone if to show them how to help themselves. Giving money only enables bad behavior.  
9. Mindset. When spending money think about how it will affect your financial goals, your future, your family. If you buy a new pair of shoes that costs $200 how will that affect your family budget next week. Do this every time you spend money. This will help you to see how your spending impacts others. 
10. Debt. Pay down debt. Get current on any late payments. Negotiate with creditors to setup or settle accounts. Pay more than the minimum monthly payment to pay down debt faster.  
11. Risks. Avoid risky financial products such as payday loans, cash advances, advance credit or other risky financial products. These products cause you to owe more money than you originally did and make your financial situation worse. 
12. Credit History. Order a copy of your credit report to check for any errors and unknown accounts that you owe. Fix any errors and setup payment plans for past due accounts.