Three action steps for setting financial goals in the New Year!Like what you hear? Help us out by writing a review at iTunes. Questions go to money@qdnow.com. Thank you!
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155 MG New Year's Money Resolutions to Keep
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Imagine your future differently at Capella.edu. Hello and welcome back to Money Girls' Quick and Dirty Tips for a Rich for Life. I'm your host, Laura Adams. To help you take charge of your finances in 2010, we're going to address the five pillars of personal finance one at a time. So this post is the first of a five-part series. Each topic will help you build a strong financial foundation. The topic we'll cover today is about setting financial goals. The first step to creating financial goals for a new year is to evaluate the old year. Ask yourself what went right and what went wrong over the past 12 months. Maybe you didn't save as much for an emergency fund as you'd planned. Perhaps you were unemployed for some time and got really behind on paying your bills. Now's the time to make peace with the past and to get serious about creating a better financial future. Decide what you'd like to accomplish in both the short-term and the long-term. For example, a good short-term goal might be to pay off a credit card or to save money to start a part-time business. If you want to save $3,000 over the course of a year, you can break that goal up into manageable amounts, like $250 a month, $58 a week, or $8.22 a day. A worthy long-term goal would be to consistently fund a retirement account or perhaps to save for a child's education. I've created three action steps in this post to help you create and accomplish your unique financial goals. The first step is to assess your current financial situation by creating a net worth statement. You can calculate it on paper, in a software program, or in a computer spreadsheet. Figuring your net worth isn't difficult. It just takes a little time to gather and accurately record all your information. You simply add up all your assets and subtract out all your liabilities. The resulting number, whether it's positive or negative, is your net worth. Assets are things you own that have value, such as real estate, cars, jewelry, electronics, cash in the bank, investments, and retirement accounts. Liabilities, on the other hand, are the remaining balances on your debts, such as mortgages, car loans, or credit cards. Calculating your net worth should be an integral part of setting financial goals because it's an indication of your overall financial health. When your net worth increases from one year to the next, you can pat yourself on the back. Higher net worth means you've increased your assets, decreased your debt, or done both. That's an indication that you've become healthier, at least in a financial sense. But if your net worth is declining, one of your goals should be to eliminate or decrease your debt. After considering what you want to accomplish and analyzing the big picture of your finances, the second action step in goal setting is to dive into the details of how to make it happen. That's done by creating a spending plan, also known as a budget. A spending plan is where the rubber meets the financial road, so to speak. You know the drill, you list all your sources of income, and each of your expense categories. It helps to refer back to at least three months of your prior spending history, so you can see where you spent your money. You have to add your financial goals to your spending plan. For example, if one of your goals is to contribute the maximum amount, $5,000, to an IRA, you'll need to allocate $415 per month for that purpose in your plan. That may force you to cut back in other spending categories, such as entertainment or eating out. A good rule is to spend no more than 85% of your income on living expenses, such as housing, groceries, and clothes. That leaves 15% for your savings, investments, or other special goals. By the way, my latest audiobook, Money Girls 10 Steps to a Debt-Free Life, has entire chapters dedicated to creating a net worth statement and a spending plan. For much more information, download a copy at audible.com, amazon.com, or in the iTunes store. You'll find the links to all the sites mentioned in this podcast on the blog at moneygirl.quickendirtytips.com. Be sure to see the resources section at the bottom of the post for additional links to net worth and budget worksheets. Once you've shaped your spending plan to account for all your expenses and financial goals, you're ready for action step number three, get organized. You can manage your money and meet your goals much more efficiently when your financial house is in good order. And that doesn't mean just being organized in January, by the way. It means being organized for good. I strongly recommend that you do all your money management and budgeting with financial software like quicken. Quicken Deluxe 2010 is available for $59.99 at quicken.intoit.com, and it's well worth the price. But there are good free programs, too, like New Cash and Ace Money. Mint.com is a free online tool for money management and budgeting that you should check out. The new year is a great time to make the switch to a computerized system. And if you're not already banking and paying your bills online, I encourage you to make the electronic leap in 2010. Many banks offer a free bill pay service that allows you to pay any individual or business by check and to pay many companies by direct electronic transfer. You can put your financial goals on autopilot by setting up recurring transfers and payments. Download all your banking, bill pay, and credit card transactions directly into certain software and online programs, such as quicken online, acemoney, and mint.com. It just doesn't get any easier than that. Here are some final thoughts about setting financial goals. If you have a spouse or life partner, create your financial goals together. If you're single, consider getting together with a close friend or family member to talk about your money resolutions for the coming year. You could discuss your goals over dinner, during a walk, or on a long drive somewhere. If you don't have someone you feel comfortable talking to, or if you do but also want professional guidance, make an appointment with a certified financial planner. I suggest meeting with a fee-only advisor. That's a type of financial advisor who never accepts commissions for products he or she recommends. If you don't know who to call, ask for referrals from friends, co-workers, or visit napfa.org. NAPFA stands for the National Association of Personal Financial Advisors. No matter how much money you earn, if you overspend or neglect to save and invest enough to achieve your goals, you'll always come up short. Achieving your financial goals comes down to planning for the future, spending within your means, and practicing good financial habits. Here's to a happy financial new year, everyone. September is a great month for planning. We start thinking about the rest of the year, whether it's back to school, big year-end work projects, holiday plans, or travel. Planning ahead is crucial in life, especially when it comes to what happens when you're gone. Getting life insurance may sound daunting, but policy genius makes the process a breeze. With policy genius, you can find insurance policies that start at just $292 a year for a million dollars of coverage. Some options offer same-day approval and avoid unnecessary medical exams. Policy genius's technology lets you compare quotes from America's top insurers in just a few clicks to find your lowest price. It's the country's leading online insurance marketplace. And if you ever need help or guidance, they have an expert license support team to answer your questions, handle all the paperwork, and advocate for you throughout the process. It's never too late to plan ahead. Go to policygenius.com or click the link in the description to get your free life insurance quotes and see how much you can save. That's policygenius.com. With the Wells Fargo Active Cash Credit Card, you can earn unlimited 2% cash rewards on purchases you want and purchases you need. That means you earn 2% cash rewards on what you want, like season tickets to watch your favorite team, and 2% cash rewards on what you need, like paying for parking. That's the beauty of the Active Cash Credit Card. It's ready when you are, with unlimited 2% cash rewards. The Wells Fargo Active Cash Credit Card. That's real life ready. Terms apply. Learn more at Wells Fargo dot com slash active cash. Imagine earning a degree that prepares you with real skills for the real world. Capelli University's programs teach skills relevant to your career, so you can apply what you learn right away. Learn how Capelli can make a difference in your life at Capelli dot edu. Oh, and while you're surfing around, be sure to visit quickandertietips.com to take a look at the sleek new website. The new design makes it easier to search for topics of interest, find archive shows, submit questions or comments, and to connect on Facebook. I'm glad you're listening. That's all for now. Courtesy of Money Girl, your guide to our richer life. Imagine earning a degree that prepares you with real skills for the real world. Capelli University's programs teach skills relevant to your career, so you can apply what you learn right away. Learn how Capelli can make a difference in your life at Capelli dot edu. When you need meal time inspiration, it's worth shopping king supers for thousands of appetizing ingredients that inspire countless mouthwatering meals. 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