The financial picture is murky and uncertain. After the massive Wall Street bailout and the crash of the housing market, consumers are struggling to find their way. When you look at the massive amounts required for a secure retirement and the huge mortgage, you're barely chipping away at it each month. Financial planning continues to be the "elephant in the room". Stop looking at the "big picture"-it's scary and bleak. Financial Advisor Suze Orman says start focusing on the small steps you can manage today that will help you prepare for tomorrow's uncertain future. Taking tiny steps today is your key to financial planning. Here are some small moves that yield big dividends:
- Save A Bit At A TimeYou may find it unrealistic to attempt to save an eight month emergency fund or sock money away for a down payment on a home, but that's no reason not to take tiny steps to put money in reserve for "emergencies". You may not be able to snap your finger and accomplish this savings goal, but just start with tiny steps. Move toward your goal one step at a time. What can you put away each week or each month to get closer to what you want to achieve? Put $50 a week into a bank saving account paying 2 percent interest and in three years you'll have more than $8,000.
Save A Little Self-DisciplineOkay, so where do you find the money to put toward your financial goals? Many people are dealing with a layoff or furlough. Some are taking jobs at have the salary of their last job just to get back into the work force and to gain benefits such as health insurance. Look at your spending and separate your wants from your needs. Pull out your last three bank and credit card statements. Circle every charge or debit that is not a necessity. Every time you cut back on an expense, you can add that amount to your savings. Downgrade your cable service or phone service. Take on your nail care, hair care, and some home or car repairs yourself. Save money by not eating out. Rent videos versus paying movie theatre prices. You can even save on popcorn. I bet if you give your expenditures a serious look you can find avenues to help you save money.
- Automate and SaveFinancial dreams are derailed by thwarted by "good intentions" that never materialize. Put your financial life on "autopilot" and force yourself to save. Your 401K is a great example of auto-investing. Make sure money goes into your retirement account every paycheck automatically.
Have a specific amount automatically transferred to your saving account each month for a down payment on your dream home. Have $100 a month saved for five years at 2 percent interest and in 5 years you could have $6,300 set aside. An FHA-insured mortgage requires 3.5 percent down payment, so $6,300 would be enough to buya home costine $180,000.
If you suffer from late payments , set up bill pay accounts through an online bank. This will save those $39 late payment fees on credit card payments and lift your FICO score.
- Take Advantgage of Company Match to your 401K
Contribute enough to collect the maximum employer match contribution to your 401K, otherwise you'll be throwing away free money. If your employer contributes 50 cents for every dollar you invest in your retirement account, up to the limit allowed, take advantgage of this benefit. The employer woulld contribute $1500 when you contribute $3000. Every penny you fail to take advantage of is wasted resources. ($3000 spread over 26 weeks on a bimonthly paycheck equals $115 contributed every two weeks. The employers match is $57.50 every two weeks.)
- Spend $50 per month for Peace of MindMost people haven't provided their family with protection if they should die prematurely. Term insurance is easily affordable for the benefit of peace of mind, knowing your family will be taken care of if something should happen to you. A healthy 40 year old woman can buy a million dollar 20 year term life insurance policy for about $50 a month., less if you are younger and more if you are older. Shop for term policies at selectquote.com and accuquote.com.
Get Necessary Paperwork in OrderYou must have these four document set up: a revocable living trust, a will, a durable power of attorney for finances, and a healthcare directive. There a plenty do-it-yourself resources available on line.- Pay Off Your Loan QuickerMake an extra mortgage payment each year. You can spread that payment over 12 months if needed. You'll cut your finance charges substantially and significantly reduce the amount of time you are paying on your home. If your mortgage is $150 monthly for example, paying an extra $125 each month could save you five years and $61,000 in interest payments on a $250,000 charging 6 percent.
These small steps are doable and are a great way to approach your financial planning. It' taking on the elephant, one bite at a time. It can be done, now Just Do It!
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