Thursday, December 1, 2011

4 Must Have Priorities to Get Your Financial House in Order

Most of us know that our finances are one of the most neglected areas in our lives. A lot of us don't get involved with our finances any more than absolutely necessary because it's kind of intimidating and sometimes boring. Of course it's intimidating - finance involves a lot of terms that most of us do not use in our daily vocabulary. Some financial words are just downright scary - like 'shortfall.' Eesh, gives me the shivers just typing the word!

It's important for you to recognize that you have access to resources that can help you understand and take control of your money. Even if you are not all that interested in financial matters, there are plenty of people that are, and that are willing and able to help you. You do not need to do it on your own, in fact, I encourage you not to. I, for example, love learning about all things having to do with money. I'm obsessed with it. I thought I had enough knowledge and practice to manage my own portfolio successfully. After 3 years of a steady decrease, I finally swallowed my pride and admitted that I needed some help. I was self sabotaging (from a financial perspective) and I didn't even realize it. Duh.

In order to get your financial house in order, you need to set and commit to 4 priorities:

1. Protection Management. Otherwise known as 'Quick Cash'. This is cash that you have on hand that you can dip in to should live walk by and kick you in the butt. Believe it or not, this is the foundation to your financial house. Why? Because Its liquid and you can access it quickly. Cash on hand means you don't dip in to your long term savings or retirement accounts.

2. Become Debt Free. Organize your debts based on how much you owe. Start with the smallest balance first, pay it off, apply that money to the next smallest balance and when you pay that off, take BOTH of the previous payments and apply them to the next. You are already used to living without that money - send it to the debt and you'll obliterate it in no time.

3. Build and Manage Savings. It is said that 65% of baby boomers will be financially dependent on either the government or their family or friends for the rest of their lives. That number will continue to increase as more and more boomers enter retirement. If that doesn't scare the pants off you, you may want to check for a pulse. Now, if you dare, take a look at your own family or friends. Remember that 6 out of every 10 people you personally know will be dependent on somebody for the rest of their lives. I did the same for my family - not a pleasant realization. I figured I would have to help at some point but I did not realize the magnitude of this situation! The people in this 65% dependent statistic are not poor folks either. These are people that worked all of their lives, saved as best they could and they still aren't prepared and never will be. The statement 'up a creek with no paddle' comes to mind. Cringe.

As the rate you are going right now, is that going to be you? It was definitely me, before I got a plan. It's amazing how having a simple plan in place takes a hopeless or potentially hopeless situation and turns it around. It won't be easy, or pain free but worth it all the way. If you don't already have a plan in place, or don't understand the one you have, call your financial adviser today and get them out to see you. They will help you get your savings squared away and give you peace of mind as well.

4. The final priority you need to get your financial house in order is income management. Analyze where your money is going, re-route it if it's not improving the quality of your life and develop a realistic plan. Most Americans have been living beyond their means for years and funding it with debt. Try to live as if debt (ahem, credit cards) were not an option. I'm not saying don't use them, just use them wisely. Only spend what your monthly income can pay off 100%. If it works for you, use cash instead of plastic to keep you in budget. Find a way that works for you, that doesn't sacrifice the quality of your life, and start living the plan.

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