Whether you are 22 and just starting out or close to retirement, you need to keep your finances well organized.
It is a mistake to think that making a lot of money ensures financial success. In fact, studies show that it is easier to spend a million dollars than one hundred for the simple reason that if you only have a little money, you pay close attention to each dime whereas a million can lull you into a false sense of security. While this is an extreme example, the idea is the same: you need to keep track of your net-worth and have a good plan for the future. Add to that the difficult economic times we are in and it becomes even more important that your finances are organized and well understood by you.
Alicia on ‘Break It Down’
‘Dealing with your finances can seem overwhelming because there are so many huge questions to answer: when are you planning to retire; how much do you need to live on when you retire; can you afford to send your children to private colleges; is it a good time to have another baby; how much cash should you keep on hand for a rainy day. All these questions and more can cause what we call ‘organizational inertia,’ or a sense of paralysis that overwhelmed. And it’s easy to see why! It isn’t always obvious how you can stretch your paychecks across living expenses and long-term savings. The best cure for this inertia isn’t burying your head in the sand, but rather breaking the big problems down into smaller, digestible pieces. Work on one area at a time, don’t try to tackle everything at once.’
Sarah on ‘Prioritize’
‘Very few people have the financial luxury of being able to do it all. For the rest of us, probably the most critical component for financial success is the ability to prioritize. What you choose not to do with your money makes it possible for you to accomplish what really matters. Of course, that is easier said than done! If you feel like a fish out of water when it comes to deciding what not to do with your money, ask for help. A financial advisor, whether a certified financial planner, an accountant, a stock broker, or just a trusted, financially successful friend can be a tremendous help when it comes to articulating priorities and setting plans to meet your goals.’
Here are some other helpful financial hints to help point you towards success.
#1. Pay Attention to Details
What may seem like small potatoes today over time can have a significant impact. One late bill can cost you $30 or more on unnecessary fees and/or higher interest rates because of your irregular payment history. Stay on top of bills and financial statements by organizing your inbox and switching to e-statements whenever possible. To ensure you don’t fall behind on any bills, set either a weekly or bi-weekly appointment in your calendar to pay the bill. It may seem extreme, but designating a day and time for bill paying each week will keep you on the straight and narrow.
#2. Keep a Scorecard
Synopsize your total financial picture once a year. It needs to include everything: what you made, what your investments are and what they produced, and what you think you will make next year. This will help ensure that you are on track. Then keep these yearly summaries so that you can compare where you wanted to be versus where you are. This can also help you understand when you might need to change direction in one or more areas of your financial plan.
#3. Your Money or Your Life
As important as this is, money is only one part of life and not even the most important. If you let it, money matters can consume your life. Remember to keep focus on the really important parts of life: family, home, happiness, love and whatever else is in your heart. Pursue long-term financial security but never at the expense of your life.