2020 Financial Checklist

1 – Budget

Each month you need to create a unique budget. Every dollar you plan on making needs to have an assignment. The money for rent is paying rent. The money for food is paying for food. The money for utilities is paying for utilities. And so on. By assigning an amount to each category of spend, you can then build habits and discover opportunities to save. If you notice at the end of each month that you have $150 left after everything is paid for and accounted, perhaps you can add that to your savings goal for that month (nice!). Or, maybe you want to take a trip and can continue your $150 surplus each month and pay cash for your plane ticket of $450 in three months. The budget creates a plan and holds you accountable to live within your assigned categories of spend. Each month presents it’s own unique costs, thus requiring it’s own unique budget.

Action Plan: Track your expense for the next sixty days. Once the sixty days is over, sit down and review your expenses in detail. By capturing sixty days of data, you can easily spot trends. Perhaps every Saturday you end up eating out. Instead, make the effort to cook at home before meeting friends out. Find ways to tighten up your budget or cut back spending in areas to save more in others.

2 – Emergency Fund

Emergencies happen when you least expect them. This is why you need a three-six month fully funded emergency fund. This allows you to cover unexpected costs that you did not account for in your budget. Got a nail in your tire and it’s going to cost two hundred dollars- this would be a great time to use the money in your emergency fund. This fund is in place to keep you moving forward from the minor inconvenience to a significant life event. If you were to get laid off from your job how would you support yourself until you could find work again? This is why you need three to six months worth of expenses saved in an easily accessible account. This account is your own self-insurance policy from what life can throw at you.

Action Plan: By tightening up your budget, begin to get excited about saving money with a purpose- to fully fund your Emergency Fund. This should cover three to six months of expenses (not gross income). Again, the Emergency Fund is to cover any unexpected situations life can present. When you have this in place things like a broken A/C unit, cracked windshield, or medical bill become less of an emergency and more of an inconvenience.

3 -Debt

If you owe money on anything, such as student loans, cars, credit cards, etc., you need to clearly lay out what is owed for each and the total of all debts together. This gives you a clear number and goal of what you need to pay off. With your budget in mind, include these debt repayment plans so that you can get to owing zero and take control of your financial life. Debt makes you a slave to the repayment plan. Throw everything you can afford at debt to get it out of your life and simplify your finances. With less money going out, you can focus on building wealth.

Action Plan: Create a spreadsheet outlining all debts. This includes car loans, student loans, cellphone device payments, all the way to the new couch you financed. Include minimum monthly payments along with the interest rates. You need to clearly see how much money you owe on what and create a plan to pay it all off immediately. Carrying debt gets in the way of building true wealth through saving and investing.

4 – Retirement/Saving

Built into your budget should be money for retirement/savings. By assigning an amount to be designated for savings, you are making an intention and holding yourself accountable. Typically, when people need to shuffle their budget around, the first category to be borrowed from is savings. It is usually justified by sacrificing the security of tomorrow for the excitement and pleasure of today. Delayed gratification is a difficult task to learn but very powerful. When you begin to see your money make money in a retirement/investment account, you will then understand delayed gratification and compound interest, and their power when used together. Aim to save at least 15% of your income into a retirement account. When you earn a bonus at work, resist the temptation to inflate your lifestyle (i.e. upgrade a car, buy the latest cellphone) and instead increase your contributions to retirement. Do this and your future self will thank your younger self for many years.

Action Plan: Calculate 15% of your gross income to see your goal of saving for retirement (this does not include a company match). Take that number and divide by the frequency of your paycheck being deposited (weekly=52, biweekly= 26) to see how much money you need to designate towards retirement each paycheck. Again, the fifteen percent is a minimum recommendation. If your budget, salary and situation allow aim for an even higher retirement goal. Don’t believe me on the power of saving for tomorrow? Follow the link to Dave Ramsey’s Investment Calculator to see the power of compound interest over time, it will change your attitude about saving- https://daveramsey.com/smartvestor/investment-calculator?snid=tools.investingcalc

The new year is an exciting time to adopt new, healthy habits to your routine. Be sure to include adopting strong financial habits in your life to ensure a bright future where you feel confident about your financial standing and the future.



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