It may be simple, but that doesn’t mean it is easy. The hard part is the psychology. We often hear tips and recommendations spouted from pundits telling us the simple things to do that will improve our financial lives. I do the same with my clients. It truly is a case of easier said than done for all of us. Myself included.
For example, some financial tips seem simple enough: save a 6-to-9-month emergency fund (9-to-12 if you are single), fully fund your IRA, pay off credit card debt, pay yourself first… These actions are simple, but when you are starting out or trying to turn your financial ship around, they are not so easy.
First, you need to recognize and accept that you truly want to change your financial health. You have to make this decision and accept that change will take time. You must also realize that it will be difficult at first, but that it can be done. You have millions of supporters who have already done it and you can draw inspiration from those who went before you.
Second, start small. Don’t tackle all the areas you need to improve at one time. If you do this and miss a goal, it may derail you from your overall goals. Pick one goal and break it down into smaller steps to get started.
Let’s look at saving that 6-to-9-month emergency fund. It’s a simple concept; your emergency fund covers your monthly expenses in the event of loss or disruption of income for up to nine months. It’s also there so you don’t have a need to borrow from your retirement accounts, dip into your taxable accounts, or have to rely on incurring credit card debt. It helps you maintain your standard of living during the income disruption. For example, if your total monthly expenses for rent/mortgage, food, insurance, utilities, transportation, entertainment, and any other items total $3,500 per month, your goal is to save in cash between $21,000 and $31,500. Now, lots of folks recognize that is a daunting task and easier said than done. First, recognize and accept that you need it; second, start small. Break it down, and chip away at the goal week by week, month by month. Make your first step examining your monthly spending and see where you can cut that won’t affect your quality of life. Take some of that savings and start putting it into a cash account. Next, aim for one month’s expenses. When you hit that target, acknowledge and celebrate. Look ahead and continue stashing cash and finding other areas where you can save. You should work with your planner to find the best options for where to hold your cash.
Once you have a goal underway and it is manageable, take a look at your other simple goals and use the same process to get started on the next goal. Before long, it will become easy for you to set financial goals and make progress toward them. You can work on goals concurrently once you get the steps down and decide to make the change.
You should work with a financial planner to help you work through some of your goals. Like with credit card debt, many planners can analyze your debt and help you determine which debts to pay first to get the biggest bang for your buck so you are not spinning your wheels. Stop rounding up payments on each debt and focus that extra money onto a specific debt whether you are using the avalanche or the snowball approach. Both have benefits and value, but the route selected needs to resonate with you and help you reach your goal.
Understand that you are your most important asset and your hard-earned money should go to you first, before others, in the most advantageous manner. Maybe you are already paying yourself first; 401(k) anyone? If you think about it, deducting pre-tax money and sending it to your retirement account is a form of paying yourself first. As is contributing to your cash savings to build your emergency fund, or paying off your debt. There are many simple ways to improve your financial health. Make sure you are taking advantage of each easy opportunity that works for you.
As an independent Certified Financial Planner™, I can help you focus on your finances and build a better financial future. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #CFPPro #savemoney #financialhealth