5 Suggestions for Getting Control of Your Finances

We are excited to bring you a guest post from Steven B. Smith!

Have your personal finances been a bit of a challenge? According to Mvelopes’ Financial Fitness Survey, you aren’t alone!

• Nearly 90% of survey respondents are moderately to very concerned about their ability to meet future financial obligations for major items, such as education and retirement.
• 73% of respondents said their financial situation is about the same as (40%) or worse than (23%) when compared to the previous year.
• 66% stated their approach to financial management is either reactive or simply total avoidance.  Only a small 34% follow a plan of action.

 

Here are 5 suggestions that you may want to consider.  Now is the time to get control of your finances, and take that first step down the path to financial fitness.

 

1. Spend less than you make.

Just like you can’t lose weight if you take in more calories than you burn… you can’t save money if you spend more than you bring in.  Spending less than you make on a consistent basis is the key to reaching financial fitness and financial stability.  You can’t increase your savings, make investments, reduce debt or even make wise spending decisions if you’re consistently overspending your income each month.  49% of respondents, to the financial fitness survey, said they rarely, if ever, use a budget to manage household spending.  No wonder they have so many challenges with overspending, increasing debt and lack of savings.

 

Put together a spending plan and make it one that works for you and your family!  Mvelopes® (www.mvelopes.com) will help you create an online spending plan.

 

2. Save more… at least 10% of your income.

Ever hear of the theory of paying yourself first?  That’s basically what this is.  If you make it a habit to pull out 10% for savings and investments for retirement, before you pay any other bills, you are actively working towards a better financial future for yourself.  According to Mvelopes’ Financial Fitness Survey, 48% of respondents saved nothing in the past 6 months and 31% saved less than 10% of their income.  Don’t be one of the statistics, take action today and start saving!

 

3. Start an emergency fund.

If you don’t already have an emergency fund, start one today!  Your emergency fund should have a minimum of 3 months worth of expenses in it.  This is your emergency money for a job loss, emergency repair, unexpected emergency medical expense, etc.  If ever you have the misfortune of an unexpected job loss, unexpected car repair, unexpected appliance problem… you will be far more prepared to weather the storm if you know you have a little breathing room on your finances, thanks to your emergency fund!  That peace of mind makes all the difference.

 

4. Reduce your debt.

Use the debt roll down principle to quickly reduce your debt. Make a list of all your debts and prioritize them in order of interest (highest to lowest) or in order of the number of payments till payoff (fewest payments at the top).  Once your first debt is paid off, roll that payment amount into the next debt on your list. Follow the same procedure when the second debt is paid off.  You will not only reduce the number of years you will have payments, but you will also save thousands in interest if you follow this principle until you are completely debt free.

 

5. Manage your portfolio.

If you have any 401k accounts from former employers, be sure you roll them over into an account that you control. Consolidation can also make your retirement accounts easier to manage, however, in doing so make sure you don’t jeopardize the diversification.  Tools like Mvelopes can help you keep an eye on all your investment accounts from one spot, quickly and easily.

 

Get on the path to financial fitness!

 

By Steven B. Smith, President and CEO of Finicity, the developers of Mvelopes and author of Money for Life – Successful Money Management and Financial Fitness in Just 12 Weeks and the Money for Life Success Planner – A 12-Week Companion to Achieve Financial Fitness.