Start your year off on the path to financial fitness.

Have your personal finances been a bit of a challenge?

Here are 8 suggestions that you may want to consider for this year.  Now is the time to get control of your finances, and take that first step down the path to financial fitness. Why not start this year off on the right financial foot?

1. Spend less than you make.

Just like you can't lose weight if 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. Put together a spending plan and make it one that works for you and your family.

2. Save at least 10% of your income.

This is called ‘paying yourself first’.  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.

First place to start:  calculate how much 10% of your income is in $$ per pay period.  Now you know how much you should to be putting away.

3. Calculate your net worth.

Do a reality check to ensure you are on the right track. Your net worth should be increasing each year, even if it is just by a small amount. Calculate your net worth by adding up all your assets (i.e. cash in the bank, investments, house) and subtracting all your debt.

If your net worth has decreased from the year before, take an honest candid look at where you can make adjustments to improve these numbers. Consider accelerated debt reduction.

Consider increased savings. Even consider canceling every credit card you have if it means that you stop overspending and start saving. Be proactive in your efforts to get financially fit!

4. Start an emergency fund.

If you don't already have an emergency fund, start one today!

Your emergency fund should have a minimum of three month's worth of expenses in it. This is your emergency money for a job loss, emergency repair, medical expense, etc. Keep these funds in a money market account or other high interest, easily accessible account. If ever you have the misfortune of an unexpected job loss, unexpected car repair, or 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.

5. 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 until 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.

6. Use credit cards for the benefits, not the penalties.

If you use a credit card, only do so when you know that you already have the funds set aside to pay the balance completely when the bill arrives. Do not carry a balance on your card! It wastes money and ends up costing you a fortune in interest and finance charges. Are those airline miles really worth it? Only if you pay it off every month!

7. Make sure you have adequate insurance.

We're talking home, life, disability, health, property and automobile insurance. Not too many other things will matter if you have no fire insurance and your house burns down. Make sure that you, and your family, are covered adequately!

8. Create or update your estate plan and/or your will.

Whether you are single, married, or divorced, you need to have the proper documents to make your wishes known.

Take advantage of the New Year and get on the path to financial fitness!

Irene Byrne

Bookkeeping & Tax Services for Business
112 Caplan Avenue - Upstairs
Barrie, ON L4N 9J2

PH (705)812-2002
FX (705)424-1990

www.irenebyrne.ca