Does money stress you out? Do you want to improve your financial situation? It’s time to get on the right track with your personal finances and 2016 is the year to do it. If you’re wondering where to start, use this guide that walks you through these money moves to make real progress in the new year.
Consider this your checklist. As you work down the list, check off the items you already have under control before moving to the next step.
Start with the Basics
You can’t hit a home run if you don’t know how to swing a bat or where the ball is. The same idea apples to making the right money moves to get on the right track to success. You can’t take big actions unless you first do the small, basic, easy stuff right.
If you want to make progress, build a solid foundation. Make sure you have the following items squared away:
- A budget that works for you — and that you stick to each month
- An understanding of your net worth (which is your assets, like cash, savings, and investments minus what you owe, like your debt)
Deal with Your Debt Emergency
If you have debt, that’s a financial emergency. The interest your debt accumulates will prevent you from building wealth, and you need to knock it out as soon as you can.
One of the best moves you can make with your money in 2016? Create a plan of attack for how you’ll chip away at what you owe. These posts can help you get started:
- The Difference Between Good Debt and Bad Debt
- Should You Invest or Pay Down Debt?
- I.O.U.S.A. One Nation. Under Stress. In Debt
Boost Your Savings
If you don’t have debt or you created a plan to repay it, turn to your savings. You need to have a number of different buckets if you want to build your financial security:
- Emergency savings fund
- Cash savings for short-term goals
- Retirement accounts and funds for other long-term goals
Your emergency savings will help you ride out unexpected expenses that inevitably pop up throughout the year. You can cover these costs without derailing from your normal budget, dipping into savings earmarked for other needs and wants, or charging the credit card and racking up debt.
Aim to have at least three months’ worth of living expenses stashed away in a liquid savings account. That’s at a minimum. Build up from there, to whatever amount makes you feel comfortable and allows you to sleep soundly without worry at night.
You’ll also want to build up savings to fund your goals. With both your emergency and your cash savings funds, set up automated payments from your checking to your savings accounts. This ensures your goals are being funded and eliminates human error (like forgetting to make the transfer each month).
Now, turn to your retirement accounts. To build a sound financial future, you’ll want to contribute at least 15% to 20% of your gross income to tax-advantaged accounts (which might mean a 401k if you’re employed, or a SEP IRA if you’re self-employed. Talk with a financial pro to determine your options and what’s best if you have multiple choices).
Address Your Money Mindset
How we think matters just as much as the hard numbers and data in personal finance. If you don’t address your mindset, you won’t make lasting or sustainable progress.
Make sure you take time to think about things like:
- Rethinking Your Wants and Needs
- The Real Road to Wealth
- How to Forget the Joneses and Embrace Frugality Instead
If you can put these ideas into action, you’ll be well on your way to seeing real progress with your finances in 2016. And if you feel you need a higher-level conversation to continue pushing your success forward? Consider reaching out to a fee-only financial advisor who can serve as your fiduciary to address your questions and create a road map to greater financial success.
For Money Guy fans, you can work directly with Brian and Bo in order to build wealth and reach your biggest financial goals. Get in touch today and see how having your own personal Money Guy can make a positive impact on your personal finances!