The beginning of the year is typically a time to sit down and plan out your expenses. Perhaps you made some New Year’s resolutions related to your health or exercise — so why not resolve to get your finances in order too?
Here are five resolutions to help get your finances on track for 2016:
1. Stop procrastinating on financial decisions
Procrastination is one of the main obstacles to planning effectively for your long-term financial goals. People sometimes have a tendency to put off making important financial decisions due to a lack of confidence. Typically, the lack of confidence is linked to the fear of making a mistake. But you can easily overcome this obstacle by educating yourself. Enroll in financial classes or workshops to increase your knowledge base and your confidence.
2. Know your finances
Before you can put a plan in place, you need to organize and understand your expenses, savings, and debt. You should know exactly how much is coming in, how much is going out, and how much is left over. Not only is it important to take the time to create these cash management statements so you have a starting point, but it is also important to include your spouse or significant other in this process. Some people shy away from talking to their significant others about financial matters, for a variety of reasons. But it is important that you both have an understanding of the family finances and are able to set goals as a couple. Both of you should be knowledgeable about everything from the monthly budget, to insurance, and investments.
3. Create a monthly spending plan
Do you know where your money goes? Do you have a positive cash flow? If your answer is, “no” or, “I don’t know,” to either of these questions, you need to create a spending plan, or budget. We all know how important it is to live within our means, but it is equally important to identify where your money is being spent. Creating a spending plan also helps you identify areas where you can potentially reallocate to fund your goals.
4. Commit to building wealth
Once you have built your foundation, you should focus on building wealth. But what does that involve? Are you just saving money or are you actually building wealth? It’s important to understand the difference. Saving is important for creating your emergency fund or for short term goals, while building wealth is about making your money work for you. You need to understand the basics of investing, how to make investment decisions, and the process of creating an investment plan.
5. Ask for help
If managing your finances feels overwhelming or you need additional guidance, it may benefit you to seek professional help. Consider working with a Certified Financial Planner™ professional. The key is to work with an advisor who you trust and who truly understands you, your goals, and your situation. A trusted advisor can provide careful planning, financial education, and help you achieve your long term financial goals to live the lifestyle you desire.
Remember, you are the CFO of your life! It is important to take some time out now to plan your finances and consider the above tips to help you build the financial future you desire in 2016. If you don't want to go at it alone, consider checking out my step-by-step process to help you gain the confidence and awareness in building the financial future you want. My course, Build Your Dream Financial House, starts on Feb. 23, 2016. For more information, please click here.
Pamela Plick is a member of the DailyWorth Connect program. Read more about the program here.