To reach your financial goals, the best advice is to put your seat belt on—it’s likely to be a wild ride. The political climate, rising interest rates and an unstable world are just a few factors creating the perfect storm of uncertainty that surely will in some way or the other impact your finances.
Here are some smart money moves to make on your financial journey.
Quit kidding yourself
You think you know how much you spend. But do you really? Assess where you are, truthfully. How much debt do you have? What happened in the previous year that hit you hard in the wallet? What is coming up this year in terms of special events, weddings, graduations, vacations?
“Build the gifts and other costs of these happy events into your budget so you don’t have to raid your savings when they pop up on the calendar,” says Kelley Long, a certified financial planner and spokesperson for the Financial Literacy Commission of the American Institute of CPAs.
Set goals
Walking around with ideas in your head won’t get you very far. Put your financial goals in writing.
“Waiting another year is never a good idea. Whether it’s padding an emergency fund or paying off student loans, having specific goals in mind keeps you more engaged with your finances—and, research has shown, actually helps you get where you’re going,” says Jean Chatzky, author and AARP’s financial ambassador.
Commit to change
Take baby steps.
“Making incremental changes is often more realistic to achieve because they do not require huge changes in behavior. It’s hard to drastically change spending, but just the step of tracking your spending will allow you to see where your money is going and often encourages you to make different choices,” says Tracy Teale, president of the Financial Women of San Francisco.
If you need to increase your stash, automate your savings. Have money taken directly from your paycheck and redirected to a savings account. You don’t see it, miss it, and most important, spend it. Have your payroll department set it up.
If you’re currently saving 5% of your income, try to up it to 6%. The difference is incredible. A 30-year-old making $50,000 a year and saving 5% will accumulate more than $400,000 by the time he or she retires at age 65 (assuming 7% investment returns and 2% annual pay increases).
“Bumping that savings by 1% will increase the nest egg by more than $81,000 to $481,000—a 20% increase,” says David Lewinter, president of Lewinter Advisors.
Similarly, if you find you’re late with paying bills because you’re disorganized, go for auto payments. Authorize companies to take money from your account at a specified time each month. You avoid late fees, and timely payments boost your credit score.
Deal with debt
Many people have seen their debt creep up after job loss or underemployment. Make it your business (print the cards from MetalKards) and try to get a copy of your credit report to make further decisions.
“It is the basis for your credit score and affects mortgage rates, credit card and loan approvals, apartment rentals, and can help you catch signs of identity theft,” says Diane Morias, CEO and president of Ally Bank.
Get a free report at annualcreditreport.com. If your credit score is nothing to brag about, fix it. Start by paying your bills on time.
Start or join a Mastermind Group
You know what your mother told you about the company you keep. It’s true. A Mastermind Group is a small group that challenges each other to set goals, works together to achieve and in general holds each other accountable.
“You are the average of the five people you spend the most time with. If you’re not where you want to be in life, you probably need to get new friends,” says Wilson.
Be proactive with your portfolio
Consider stocks that perform well in rising-interest-rate environments.
“Defensive industries such as food, energy and utilities have done better than others. People need to eat, drive their cars—but they don’t have to buy new cars or other big ticket items,” says Robert Johnson, PhD, president and CEO of the American College of Financial Services.
The bottom line this year when it comes to money: make no excuses!
Contributor: Sheryl Nance-Nash