Happy Financial New Year!
|adapted from google images|
Where to begin?
Brass tacks. Take a look at your current spending. Take the Savings & Spending Check-Up
Check out this interactive management tool by fidelity
Use the 50/15/5 rule as a budget guideline.
50 percent: Essential Expenses
- housing, food, health care, transportation, child care, debts
- Save 15% of your pretax household income
- Emergency fund. Enough to cover 3 to 6 months of essential expenses.
- Set up automatic savings & have 5% taken out of your paycheck.
- One-Off fund. Covers one-time unexpected expenses (e.g. plane tickets, car repairs, phone replacement, new water heater, furnace or a/c repairs, etc.).
This year, I/we resolve to...
#1 Spend less.
- Reduce your power bill by switching to LEDs. Turn down/up your thermostat two (2) degrees during cold/hot months. Buy a clothesline & dry clothes on the line.
- Eat out less often; freeze leftovers for lunches.
- Discontinue magazine subscriptions.
- Cut back on your cable services.
- Use e-coupons for groceries. We save between 5 to 18 percent every time we shop! Safeway Just for U
- Gas prices will go by the end of the year. Use public transportation; walk when you can.
#2 Save more.
- Read this: How to Save Money
- Set up an automatic savings plan
- Track your spending & saving with an app_try Cinch or Mint.com
- Check your statements for extra charges (e.g. auto renews on outdated devices and online subscriptions that you no longer use).
#3 Invest more.
- set up a 401K with your employer
- open up a regular or Roth IRA
- buy stock directly from the company instead of using a brokerage firm.
#4 Pay down debt.
- Read this: How to Pay Off Debt—And Save, Too
- Don't run up new debt! No new credit cards.
- Pay a little extra on your mortgage every month
- Pay down high-interest credit cards &/or loans first
#5 Set aside money for an emergency.
- Read this: How to Save for an Emergency
- Store emergency fund money in a different place. Don't mix it with regular savings.
- Consider a money market fund instead of a savings account
#6 Have a budget & stick to it.
#7 Save more for retirement.
- Aim to save at least 15% of your pretax income each year, from age 25 to 67.
- One way to do this is through a 401K and IRAs
- If you can't make 15% annually, increase your savings by 1% per year until you get to 15%. Keep going!
- Read this: How Much House Can You Afford?
- Only if you are financially stable and can afford to maintain a home.
- Don't overbuy. Determine how much house you can afford.
#9 Don't save for your kids' college.
This is where I disagree with Fidelity's advice to save for your kids' college educations. Let them pay their own way.
- Invest the money for yourself in your own name, not theirs. DON'T set up a trust account.
- Wait until they graduate from high school & see what happens. There will be plenty of opportunities to gift money along the way.
- They should pay for their own college. Period. The life lesson is so much greater when they work for it and earn it themselves.
- College is not extended high school. They are adults. Let them take financial responsibility for the choices they make as adults. The sooner they take charge of their adult choices, the better.
#10 Learn more about finances.
- Take advantage of free financial webinars & publications. Fidelity Viewpoints
- Think critically and independently. There are a lot of financial planning services available, but keep in mind that financial institutions are selling services. Learn what you can on your own.
save wisely • work hard • enjoy the rewards