financial fitness 2017

New Year Financial Fitness in 6 Steps

Notice that I didn’t call them resolutions. We routinely make New Year’s resolutions with no real intention of keeping them. In fact, how long it takes to break a holiday resolution has become somewhat of a standing joke. Don’t get me wrong, some of you jump right in with excitement, enthusiasm and willingness. That is until the commitment and implementation begin.

Achieving what you want – be it weight loss, to stop smoking or achieve another goal – always requires work, perhaps some emotional or physical pain (short-lived) and getting uncomfortable. Why? Because breaking old habits and establishing new patterns of behavior is tough.

Planning Financial Fitness

Much like personal fitness, financial fitness requires commitment. If you lack commitment or the desire to take the necessary steps to improve your financial picture you may not feel inspired. But you should know that by taking a few steps in the right direction you could start a pattern that could improve your financial picture for the rest of your life. The good news is you can take it one step at a time. The important part is you keep going until to get to where you want to be financially.

6 Financial Steps to Take This Year:

    1. Create a Budget – A Gallup Poll in 2013 stated only 1 in 3 Americans have created and maintained a monthly budget. This is a staggeringly low number. Why? Because it requires serious tracking of your income and expenses. The first couple months may be tough but will really create a visual of where your money is coming from and being spent.  Your budget will lead you on to the following financial goals.
    2. Spend Less/Save More – Take the budget you created and track it for a few months. Now it should be easy to see where you may cut back to save more money. Many uncover unnecessary expenses or payments they didn’t even realize they were making. While you may be struggling to make more money a quick and easy way to increase the bottom line is to simply spend less.
    3. Create an Emergency Fund – Once the unnecessary expenses are eliminated start building an emergency fund. Typically you should have at least 6 months of living expenses in the bank or readily liquid. These are funds to protect you from unforeseen expenses such as an auto repair, losing a job, short term illness or any other unexpected expense. If you find some spare cash after you trim your budget make a smart investment and begin an emergency fund. Having this cash on hand could potentially save you from a larger debt later.
    4. Pay off Bad Debt – Most credit cards charge large rates of interest on account balances. If you have unpaid balances consider paying them down as quickly as possible, then stop using them or use them responsibly by paying them in full every month.
    5. Contribute to a Retirement Plan – If you have followed the first 4 steps, contributing to a retirement plan may provide financial security for the future. Your employer may offer a plan and if not there are other options. Starting early and contributing the maximum amount allowed will not only allow for tax-deferred compounding on the earnings but also may give you a top of the line tax deduction.
    6. Implement a Basic Will Package – This doesn’t sound like a part of financial planning but it really is. The package should include your will, durable power of attorney, health care surrogate, living will and a guardianship. These documents state how your assets should be distributed at death. But more importantly can protect you, your spouse and loved ones in the event of your incapacitation. A will package may sound overwhelming but with the guidance of an attorney specialized in estate planning, it can be an easy and rewarding process.

Remember, everyone is at a different place in their life. Some may have already implemented all or some the steps where others are just now understanding the logical flow of them and are ready to begin. The best suggestion I can offer is to take a leap of faith and get started. Once you begin, don’t quit. Keep a positive mindset and be persistent. With persistence, you can feel financially fit.

Let me encourage you to embrace this as your resolution and take action. You can do it! And as always, If you have questions, know I am here to help.

This is not intended to give specific legal, tax or investment advice. Advisory Services offered through Nepsis Advisor Services, Inc.; An SEC Registered Investment Advisor.

Click Here to Download a Budget Template

 

Rick Torrington

Rick Torrington, CFP® has been offering sound comprehensive financial, retirement, asset protection and wealth management advice to his clients in Sarasota and most of Florida for close to 20 years. He is diligent in his efforts to provide clarity and financial knowledge to the public through his articles and ebooks.