Story by Pamela A. Keene | Photo by Scott Rogers
Most people would say they never have enough money, and very few people can say they are truly debt-free. However, you can take steps to make the most of what you do have and to whittle down your debt for the new year.
Whether you’re paying down debt, saving for a major purchase or investing in retirement, a long-time financial adviser in Gainesville says it’s best to make sure you have a plan and that you refer to it regularly.
“Make sure you have a goal, a game plan for your finances,” says Beth Baldwin, financial adviser with the Gainesville office of investment firm Edward Jones. “And once you have that plan be sure to do periodic check-ins to assess where you are and readdress any necessary changes.”
One of the best places to begin an assessment of your financial position is to check your credit report with the three credit-reporting services: Equifax, TransUnion and Experian. All three have credit reports and in Georgia, consumers can get a free credit report from each service once a year. Just log in to the respective services and request the report.
Consumer expert Clark Howard suggests getting individual reports from each about every four months. That way they will all be free, and you’ll be able to review your credit more frequently at no additional cost.
“By checking your credit reports, you can make sure there’s no fraudulent activity on your credit report, no unauthorized credit cards, loans or accounts,” Baldwin said. “You will also get a good picture of your finances as well as your credit score, which can have far-reaching effects on your ability to obtain additional credit, loans or mortgages.”
She says that the next steps are dependent on your age, your game plan and your goals.
“If you have a large amount of credit card debt, it’s wise to begin paying down the balance with the highest interest rate first, more than the minimum payment, all the while making the minimum payments on all other credit card balances,” she said. “Once the highest-interest-rate card has a zero balance, pay off the card with the next-highest interest rate and so forth.”
Of course, having a monthly budget for your day-to-day living expenses, such as mortgage or rent costs, utilities, insurance, food and entertainment, and an amount designed for paying off revolving debt can help you keep on task with managing your money.
Check online for free budget worksheets that can help guide you in establishing a realistic budget. The worksheets have prompts to help you include expenses that you may not think about.
“We talk about the four uses of cash: unexpected or emergency expenses, specific short-term savings goals, everyday spending and looking at your sources of income and investment spending,” Baldwin said. “Have at least six months of cash available to deal with emergencies, and if you don’t, start regularly saving at least $20 a week or as much as you can monthly to reach this goal. At least do something and stick with it.”
She advises that individuals have separate savings and checking accounts, using the checking account for day-to-day expenses and designating the savings account as a cash reserve.
“The adage ‘pay yourself first’ is good advice, unless you’re getting control of debt. Have a set amount deducted from your checking account, or your paycheck, at least monthly to deposit in your savings account,” she said. “That way it’s automatic. And by the way, automating payment of loans or regular bills can also be beneficial.”
Baldwin warns that perhaps the biggest stumbling block to managing money is impulse spending.
“I have a good rule of thumb: if you don’t have the cash in your pocket to pay for the purchase, you probably don’t need to buy the item,” she said.
She also said planning for retirement at any age is important; the earlier you begin saving and/or investing, the more chance you have of building a bigger nest egg.
“If your employer offers a match for a retirement account, save the maximum amount that qualifies for the match,” she said. “If you have a retirement account, review it and consider building or rebuilding it; if you don’t have one, start one.”
Now is a great time to be investing, Baldwin said, with a caveat.
“We’re expecting a major correction; we haven’t had one since 2008-’09, so be prepared for a correction,” she said.
Life changes, such as a marriage, birth or adoption of a child, divorce or a death are crucial times to re-evaluate your financial situation.
“You may need to adjust your goals,” she said. “And you need to look at your goals, budget and game plan at least annually because circumstances change over time. And because of this, you need to review and update your financial strategies regularly.”