When you’re halfway through the year, it’s time for a fiscal checkup. Just as you do with your annual physical, you need to determine if your budget is healthy or if expenses are bleeding enough red ink to cause financial anemia. Are you shedding pounds of debt or are you over-stressed? Will you reach your goals for savings this year? Will you have enough to spend on splurges or holiday gifts?
Examining your current financial health is going to take more than simply confirming that you have money in your checking account. We hope you are using some sort of online tool or spreadsheet software. If not, you need a complete physical.
Like the familiar, “I’m going to lose 10 pounds” New Year’s resolution, you probably set some fiscal goals for this year – like paying down debt on credit cards and loans, saving for retirement, or making a big purchase such as a house, car or vacation, building an emergency fund or, something as simple as “saving more.”
This won’t hurt much.
Amy Fidelis, marketing and education director at Mpowered, a nonprofit that counsels people on money management, says “You wouldn’t measure your physical health by only taking your blood pressure. You’d expect a full workup – check your cholesterol, body mass index and vision. It’s the same for a fiscal checkup. If you haven’t kept track of income and expenses, then pull out all your bank statements and credit card bills. Poke into all your accounts: CDs, IRAs, college funds, retirement funds and tax returns.
Calculate what you have spent so far this year and use that to figure out how your future looks. Are you still on target? Has anything changed? Did you buy a car or a house? Do you have enough insurance coverage?
Just as an over-eater may have to record every calorie, try tracking every expense, no matter how small, for at least one month. Then review your spending to see where the money went. Why didn’t you save? What blocked your success? Says Fidelis, “Sure, you buy gum at the gas station, but maybe it’s those lunches with co-workers that blow your budget.”
Are you meeting your goals? If so, consider paying off even more of your credit card debt or pumping up that emergency fund. Maybe even prepare for the holidays by buying that perfect gift when you see it, even if it’s July instead of December. Speaking of December, you need to be prepared for the rest of this year, so don’t tie up your funds in long-term CDs or clean out your accounts and get caught short.
Shape up.
If you’re not on track, don’t beat yourself up. A budget is just a general plan for future spending. If you are off a bit, there’s still plenty of time for a fix without major surgery.
Here are seven tips for improving your fiscal health.
1. Re-envision the dream. See it, touch it, feel it. Get yourself emotionally back on track. For instance, if your goal is to save enough cash to build a garage, envision yourself getting into the car without having to scrape it off on a freezing winter morning.
2. Form a dream team. Ask family, best friends, a financial planner, credit counselor and others who support your goal to join in encouraging your efforts.
3. Get real. Re-analyze your goals so you have a better chance at success. “Say you drop by Starbucks every day and spend $5 on that cappuccino – maybe stopping cold turkey isn’t the answer,” says Gibson. “If buying the coffee gives you joy, then try to set a weekly limit.”
4. Pay yourself first. Have your bank or credit union automatically transfer money from your paycheck to a savings account. “Out-of-sight, out-of -mind” really does work.
5. Get personal. See if your bank will allow you to have sub-accounts. Name each one after a goal – Freedom, What If Something Goes Wrong, Vacation, Dream Home – and then watch them grow.
6. Erect road blocks to excess spending. “Put credit cards in a sealed envelope and put them away” says Carol Craigie, a certified financial planner and professor for the College of Financial Planning. “You’ll still have them in an emergency, but if you have to drag them out for a pack of gum at the gas station, you are going to think twice.” Or, write down your goals (such as, “Happiness is having enough money to pay for my kids to go to college”) on a sticky note and wrap it around your credit card so you see it each time you pull it out.
7. Seek professional help. Sometimes you just can’t perform surgery on yourself. If your budget is on life support, sit down with a credit counselor or financial planner. Not having to pay fees after a while may be your incentive to follow the advice, and the program.
Online Help
According to a Harris Interactive Consumer Financial Literacy Survey, only two in five adults say they have a budget and closely track their spending. Mint.com and Powerpay.org are just a few of the free online tools that can help get your spending plan fiscally fit. Use them to…
- Organize and categorize your spending, set budgets and goals; some sites send e-mail alerts if you exceed any budget area and/or if you receive or pay any large amounts
- View and manage all of your accounts, track their activity
- Create a plan to become free of debt, project savings and compare your savings options
It’s never too late to gain control of your fiscal health. Just don’t let it become your next year’s resolution, too.
Note: The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendation for any individual. Please remember that past performance of investments may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this newsletter (article), will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this post serves as the receipt of, or as a substitute for, personalized investment advice from Vermillion Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed within this newsletter to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. A copy of our current written disclosure statement discussing our advisory services and fees is available for review upon request.
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