There are basic decisions that must be made by those who want to be smarter with their finances
The new year could bring a new you. Despite what the poets say, money, or at least security in life economy, it can be one of the most important steps towards happiness. On the other hand, poor money management and indebtedness can cause financial anxiety, which can cloud the taking of decisions and lead to a bad cycle.
There are three basic moves for those who want to be smarter about finances: gather information, plan, and execute.
Some may think that making a personal or household budget It is too tedious, but it is the most essential part. I suggest breaking down your expenses into 17 categories and roughly calculating what you think you spend each month versus what you actually spend, and then what you would ideally like to spend on each of them. It may sound like a lot, but it can usually be done in less than 30 minutes each month.
You will see how the extras sneak in. For example, you may think you spend $ 3,000 on housing, but don’t forget to add about $ 120 a month for repairs or furniture. If you are planning to go on vacation after vacation, don’t forget to include expenses such as cell phones, yoga classes, and fancy coffees in your total.
Next, compare your expenses with your income. Do not judge. Managing money requires facts, not blame, reasons, or backstories. Exercise can be scary, but people who don’t budget are more likely to go into debt. Budgeting is like doing sit-ups: First it hurts, then you win.
Once you have a clearer idea, it can be helpful to turn to a third party. Any adult, regardless of age or income, can benefit from a conflict-free session with a planner, and most of all, with fees they can trust.
A financial plan A full session can cost thousands, while a session can cost a couple hundred dollars. Avoid conflicting advisers who are stock brokers, as they do not advise, but rather sell investment products.
If you’re young, low-income, or in debt (or all three), try low-cost, non-conflict counselors, many of whom are funded by a non-profit or government agency.
A financial planner will help you with the basics, such as how much to set aside for an emergency fund and what to invest in for retirement, as well as how to achieve medium-term goals, such as a down payment on a house, or funds for a vacation, a car repair or holiday gifts.
Keep in mind, however, that fiduciary planners will not tell you everything you need to know about finances, such as how to ask for a raise or find a better job, or how to cut down on free expenses.
Finally, it’s time to make it happen, so let this be the year of action.
If any of the above makes you roll your eyes, consider the example of a reader I will call Alex and who lives in New York. She is 64 years old and has been financially disciplined for the past 25 years, through budgeting, planning and execution.
Your financial advisor recently suggested that you pay your mortgage, which has helped keep your monthly housing expenses low. You have been able to accumulate more than a million dollars in retirement savings and are now in the enviable position of choosing when you want to retire.
Money management is often depressing (we can’t afford everything we want), tedious, and not fun at all. But the advantage is that you gain an advantage over the boss who wants you to keep working, the bank who wants you to pay your interest forever, and the retailer who wants you to overspend.
If you think about it like that, feeling free from money worries and taking control of your financial reality could offer you much more fun and happiness in the year ahead.