5 Easy Ways To Fix Your Finances

by Scott on August 1, 2011

With all that life throws at us, like relationships, kids, work, and episodes of The Bachelor, it’s easy to let things slip by us, especially our finances. No matter what stage of life you are in, I thought I would give at least one good idea to take action on to help get you to where you want to be. So here are five common challenges that people face and what you can do to solve them:

images (1) Jake and Vienna…the root cause of many problems.

1. You find yourself not having much money left at the end of the month – The good news is that you are not alone, the bad news is that it doesn’t solve your problem. I recommend clients to perform a financial audit on themselves ….yeah I know, let the good times roll. Listen, no one likes auditors, but they do serve a purpose and that is to make sure things are running properly and efficiently. Step one would be to track all of your spending for the next 30 days. You may have heard this tip before, but few people actually follow through with it. I can tell it will give you two things; a clear perspective on where your money is actually going and better decision making on where you do spend your money. Step two would be to go through all your bills. Ask yourself “Is there I way I can reduce this bill?” Do you need all those channels on your cable? Can you scale back? Can you be even more energy conscious? Get creative, there is always something you can find if you are willing to look.

2. You are frustrated that you haven’t started saving money – This might coincide nicely with #1, so let’s keep it small and simple. The first step is the hardest, and that is to open some sort of account outside of your checking, like a savings at a bank or a money market (both which should take you 20 minutes tops to set up). I suggest building a savings account for an emergency fund before starting a retirement account like an IRA, this way your money would be 100% liquid if you ever needed it or want to use it before you turn 59 1/2. Set up an automatic transfer from your checking account or paycheck at the first of every month into this account. Treat this like a bill to yourself (ie pay yourself first!). You can start as little as $10 or $20 per month. The key here is to start with something and get momentum.

3. You’re finances are a disorganized mess – The battle a lot of folks face when meeting with a planner for the first time is that not only do they have accounts all over the place, they also have no idea what they are invested in. I think the first step is to start consolidating accounts as much as possible. This will help avoid unnecessary maintenance fees and make it easier to keep track of all your money. This biggest instigator is old 401(k) accounts from previous employers. These can be rolled either into your current retirement plan or an IRA. It will also open up your investment choices and give you more control of your money. Another good idea is using money management software like Quickin or Mint.com to keep track of all your accounts.

4. You are invested in the market but are worried about losing money– This actually sounds like the majority of people I talk with. I had one dear client once tell me she had always taken the ostrich approach to her accounts, which is to bury her head in the sand and forget about them. Here is a simple approach you can take to put you ease while also giving yourself a chance to participate in the market: No matter where the money is sitting (IRA, 401k, bank, brokerage) separate in your head what are your Savings and what are your Investments. The distinct difference between the two is that your Savings is the money that will NEVER lose value. Your investments are the accounts that you can stand to lose a little now for the potential of long term gains. I find that people really resonate with this approach, especially after enduring a decade that has thrown two miserable recessions and five Fast & Furious movies at us. Even though you can separate the two in one account by using a money market or stable value fund, I have started advising clients to have two different retirement accounts, one that is safe and with guarantees, and one for taking on an appropriate level of investment risk (and yes this is somewhat contrary to #3, but this is a case where not consolidating is worth the aggravation). Another thing we do with these account is to occasionally take the investment gains and reallocate them to the guaranteed account to lock in those profits. I know……effing genius!

5. You receive a ton of advice or have a ton of knowledge, and don’t act on any of it – I don’t think I need to tell you that we are in an age of information overload. There is so much squaking going on in the media about money and finances, I think people are in a state of overwhelm. If this is you then here was what I suggest you do: Get clear on what you are trying to accomplish and write down one long-term goal (like retirement), one thing you want to accomplish in 3-5 years (like buy a new car with cash), and one goal to be checked off in the next 12 months (ie wipe out a certain debt or have X amount in savings). If you have a purpose that’s unique to you, then you are more likely to follow through with the actions that will get you to where you want to be. So write them down, put them up where you can see them, and make it happen!

My hope is that you found at least one of these ideas useful that you could put into action. If so, let me know in the comments below or leave me your thoughts on the post, I would love to hear from you!

Make it a day invested and not a day spent!

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