Since January 1, my phone hasn’t stopped ringing with women wanting to get their finances off to a good start. Most don’t even know where to start. I have put together a list to help you get started. While this list might seem overwhelming, JUST PICK ONE ITEM and make it a priority! If you can conquer one, you are well on your way to Financial Physical Health!
1) MAKE YOUR SAVINGS AUTOMATIC. If you think you can’t afford it, start with a small dollar amount ($25 each month). You will not even miss it. Making it automatic is the key to your success! If you are already doing this, increase it by 3 or 4%. Put this money in a bank or account where it is harder to get to. Try ING, they have no minimum, no fees and have one of the highest paying interest rates for a savings account.
2) INCREASE YOUR RETIREMENT SAVINGS BY 3%. You will barely feel it at first and soon not at all. On a $50,000 salary, 3% more will save you an additional $1,500 each year. That number is even more if your company is matching!
3) INVEST IN REAL ESTATE. This goes for first time homebuyers and homeowners (homeowners – see below)! If you are renting, make buying a home a priority. Even if it seems far away, put together a savings plan for a down payment. Say you want to buy a home for $250,000 and you need $50,000 down (20%). You already have $25,000 saved and need another $25,000. If you can find $1,000 a month to save (automatically!), you should have your home in a year and a half. If you already own a home, pay extra on your mortgage. Paying one extra payment a year can shorten a 30-year mortgage by 10 years! Owning real estate is one of the best ways to become financially healthy.
4) NO MORE CREDIT CARDS! Stop using our credit and debit cards – period! For my clients with debt, this is the easiest and best way towards becoming debt free. If you don’t have the cash, don’t buy it. It is as simple as that.
5) SELF-EMPLOYED? Make sure you have disability insurance. It is one of the most important decisions you can make! One in five persons have a chance of become disabled. If you get hurt, no one is looking out for you. Check out www.workingtoday.org for their incredible disability policy.
6) CHECK UP ON YOUR MUTUAL FUNDS. With everything that is going on in the mutual fund industry today, a checkup on your funds is essential. Look them up on www.morningstar.com. Have they changed their objective in the last year? If yes, do some further digging. How have your funds performed compared to similar funds? If the answers are worse, check it out further.
7) DIVERSIFY, DIVERSIFY, DIVERSIFY. If you want your money in 20 years or more (i.e. retirement), make sure your investments are spread out among Large-Cap, Small-Cap, Growth, Value, International and Bonds. For shorter-term goals, make sure you aren’t taking on too much risk.
8) SAVING FOR COLLEGE. If you haven’t already, setup a 529 fund to help save more money for your child’s college education. The tax-free benefits will help you save more money for their education. To find out more information about your state’s fund, visit www.savingforcollege.com.
9) DO YOU HAVE A WILL? I keep mentioning this to clients. If you have any savings or investments or even any material possession you would like to pass on, you need a will. To save some money, buy a will kit at nolo.com or Staples.
10) TAKE A CLASS. Get that extra help you need. Take a class to motivate learning more about your finances. In addition to the practical information, you will feel motivated by the other people in the room wanting to take charge of their finances as well!