When it comes to money, American humorist Evan Esar may have said it best: “The Mint makes it first—it is up to you to make it last.” Of course, in today’s challenging economy, feeling like you have a good handle on your finances might seem like a pipe dream. But it’s not. In fact, you have more power than you realize when it comes to giving your financial health a much-needed boost. You just have to know where to start so you can manage your money successfully and keep your fiscal matters in tip-top shape.
We’ve asked a panel of local and national personal finance experts to share their tips and practical solutions for improving your financial condition. Together, their candid and helpful advice will be invaluable as you work to reduce your debt, build a budget, save money, invest wisely and plan for retirement.
Personal money management expert, national radio personality and best-selling author of The Total Money Makeover, Financial Peace and More Than Enough
|Jason P. Flurry, CFP
President of the National Center for College Planning, based in Woodstock
|Helga Cuthbert, CFP
Founder and principal of Cuthbert Financial Guidance, a fee-only financial planning and registered investment advisory firm located in Decatur
Get Debt Under Control
Whether it’s your mortgage, car note, credit cards, medical expenses, small business loan, taxes, student loans or any number of other lines of credit, you may feel like you’re drowning in debt. Here, the experts share their tips for paying down and managing your outstanding payments
1. “Free or low-cost debt counseling is available through the National Foundation for Credit Counseling (NFCC). The NFCC can tell you if you qualify for a hardship debt-management plan, where late fees on credit card balances are waived and interest rates are reduced. Visit www.NFCC.org to find your local affiliate today.” —Clark Howard
2. “List your debts smallest to largest. Pay minimums on all the debts except the smallest and put every dime you can toward that one. Then work your way down the list. The quick wins will motivate you to pay off debt.” —Dave Ramsey
3. “Controlling expenses increases financial security. Income is a lot like a closet space—no matter how much of it you have, it’s never enough. Ruthlessly manage your expenses and maximize discretionary cash flow to improve your financial freedom.” —Jason P. Flurry
4. “If you currently have a variable rate mortgage, consider locking into a fixed rate now. Even though you can get a lower interest rate with a 15-year term mortgage, having a 30-year term gives you more cash flow flexibility in the event of a hardship such as job loss or sickness.” —Helga Cuthbert
Build a Healthy Budget
When you’re conscious of how much you have to spend each month on both necessities and small indulgences, you won’t feel the uneasiness that comes with the unknown. The experts offer this advice for building your own workable budget.
5. “People always tell me they have no idea where their money goes each pay period. Use free online budgeting tools to register your accounts, and your spending will be automatically tracked. Mint.com, Rudder.com, JustThrive.com and WeSabe.com are just a few of the most popular websites for this.” —Clark Howard
6. “Write it down. A budget is not a form of medieval torture! It is your game plan, where you tell your money what you want it to do. This isn’t rocket science! Just give every dollar a name on paper.” —Dave Ramsey
7. “Give money away often! Those who are generous with their money typically find that more they give, the more they seem to have. It also helps you keep things in perspective. Money is important, but sharing with others is more important—and more rewarding.” —Jason P. Flurry
8. “Plan for unexpected or one-time expenses. As part of your budget, consider using an ‘escrow’ savings account and allocate a specific amount each month to pay these expenses as they occur, such as home improvements, furnishings, auto repair, clothing, vacation and future auto purchases.” —Helga Cuthbert
Living paycheck-to-paycheck puts you in a constant state of anxiety. However, if you have a plan of action in place for saving money, you’ll not only be prepared for life’s surprises, but also feel more confident day to day. Consider these suggestions from the experts.
9. “Do you have zero savings? Try automatic withdrawals from your paycheck each pay period to a 401(k) at work. If you save nothing currently, start with just one percent of your pay. Then increase to two percent in six months. You won’t miss it when you do it gradually.” —Clark Howard
10. “Have a plasectomy. Cut up the credit cards—plastic surgery. Carnegie Melon did a study and found out that people spend more money when they pay with plastic. It hurts to lay out cash.” —Dave Ramsey
11. “Have a sound college plan in place! Don’t ruin your financial future by overpaying for college. Develop a plan that gives you a fighting chance or find a qualified expert who can help make sure you pay only your fair share of the college bill.” —Jason P. Flurry
12. “Automate your savings as much as possible. Have your employer automatically take out a certain amount each month to your 401(k). Contribute at least as much as your company matches, ideally more. Also, have 3-12 months of daily living expenses in emergency cash reserves depending on your family situation.” —Helga Cuthbert
Enjoying true financial health involves more than pulling in a higher income and saving your pennies. Long-lasting wealth depends a great deal on how wisely you invest the money you do have. To make sure you choose the right investments for your needs, the experts propose these strategies.
13. “Invest ‘steady as you go’ by dollar cost averaging. That’s a fancy name for popping equal amounts in the market every paycheck via automatic withdrawals. As the market declines, your dollar buys more shares at fire sale prices. As the market gains, you buy less and avoid paying over-inflated prices.” —Clark Howard
14. “Diversify. Invest in mutual funds because they allow you to have great returns without the risk of individual stocks. I recommend spreading your investment over 4 types of mutual funds: Growth, Growth & Income, Aggressive Growth and International.” —Dave Ramsey
15. “Diversification is good—allocation is better! Allocation of your investments is like a carefully thought out, time-tested recipe—think killer chocolate pound cake! Your investment recipe makes up about 90 percent of the formula for your success, so be sure you’re using one that’s delicious!” —Jason P. Flurry
16. “Educate yourself on investing. The more you understand, the more comfortable you will be investing. Read the classic book ‘A Random Walk Down Wall Street’ by Burton G. Malkiel. Diversify your investments, keep expenses low and consider using index funds.” —Helga Cuthbert
Plan for Retirement Now
Whether your retirement is years away or just around the corner, now is the best time to start planning for your future. By having a master plan, you’ll not only have more funds available upon your retirement, but you’ll also be able to stretch your dollars when necessary. Make your plans using the following recommendations from the experts.
17. “Target-date retirement funds offer a ‘set it and forget it’ approach to investing. Funds are labeled by your expected year of retirement—say, 2030 or 2035—and the portfolio’s risk is automatically adjusted as the date approaches. I like the offerings from Vanguard, Fidelity and T. Rowe Price.” —Clark Howard
18. “Have a plan. If you want to reach your golden years with financial dignity, you have to invest now. Begin by taking part in a pre-tax savings plan (401(k), 403(b), TSP, Traditional IRA) and a tax-free savings plan (Roth 401(k), Roth IRA).” —Dave Ramsey
19. “Plan some mini-retirements along the way! Plan for some extended time away from your normal work responsibilities as often as possible. It’ll help keep you fresh and let you to enjoy more out of your life while your health is still good enough to allow it.” —Jason P. Flurry
20. “Healthcare coverage is an important part of a secure retirement. Keep in mind that based on current law, you will not become eligible for Medicare until age 65. Your good health can become a strong financial asset for you in the future.” —Helga Cuthbert
For more information from the experts, visit them online:
Clark Howard: www.clarkhoward.com
Dave Ramsey: www.daveramsey.com
Jason P. Flurry: www.yourcollegeplanners.com
Helga Cuthbert: www.cuthbertfinancial.com