When spring rolls around, your thoughts might turn to organizing your closets or giving your floors a good deep clean. Do the same thing with your finances.
Spring is a great in-between time of year to take stock of your financial health and to create goals for the rest of the year and to plan for the years ahead.
Before you dive headfirst into a new financial plan, take a look at your current situation. Is it where you want it to be? The steps below can help you get started.
Step 1: Write it all down and give direction to your spending
A coffee here, a new pair of shoes there…When you go about life, you sometimes don’t think about how much you’re spending. Small purchases on a frequent basis add up. Spend some time with our Monthly Spending Planner. It won’t capture everything, but it’s a good start and you can use the margins to add more expenses you incur. When you are able to see a month’s worth of spending in front of you, it becomes easier to determine which expenses are necessary and which areas you can cut back on.
Step 2: Evaluate and pay down or off
Get lean! Start working to pay down and off your outstanding debt. Pay consumer debt off first before tackling the home mortgage. This should all be in step with a broad financial plan for you and your family. Start with the smallest outstanding debt first and then go to the next. Each time you pay something off, take the money of your monthly payment and add it to the next loan to pay it down faster. Over time, this will create a snowball effect moving you closer to enjoying a debt free lifestyle.
Step 3: Establish a proper Emergency Fund
The Emergency Fund will help protect against unplanned events and offer income assistance during tough economic conditions. This account should remain set aside for emergencies only and separated from your checking account. Please make sure the funds are readily available but earning the most they can possibly earn. You’ll want to invest this money because short-term rates are not high. Resist the urge. Think of your Emergency Fund as lifestyle insurance. In an ideal world, having three to six months of expenses, probably closer to six, for most families, that are not business owners, is sufficient. If you’re retired, strive for two years’ worth of expenses.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
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