Happy new year!
Be honest; have you already broken one or two new year’s resolutions, even though it’s only the second week of 2017? Or, like me, have you stopped making new year resolutions altogether?
Regardless of where you fall, it’s time to look ahead to how you’re going to win 2017 financially.
Here are 3 simple things to get you started
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Step One: Go deep and change your mindset
about money: if you think having a nest egg or retiring comfortably depends on how much money you make, think again! This year, adopt a spending mindset, instead of a saving mindset. It sounds counter intuitive, but controlling your spending is far more important than meeting a savings goal. When you control your spending, you also control your debt and you truly free up cash to save. Control spending, then maximize savings!
about investing: do you think investing in the stock market is complicated, and getting financial advice is expensive? Have you convinced yourself that you’re better off doing nothing, or just sticking with a savings account at the bank earning 0.2% interest? Change that thought in 2017! Investing doesn’t have to be complicated and for many of us, especially early on, active portfolio management is unnecessary. That doesn’t mean you should “set it and forget it,” but it does mean that you don’t need to sign up with an expensive financial adviser.
Start with retirement plans offered at work, and take advantage of any free financial advice offered as part of your workplace benefits. A robo-adviser may also be of benefit to you if you already have a plan but just need guidance on where to invest. Finally, use a fee-only adviser like The FI Woman to develop a plan and get guidance on where to invest.
Step Two: Master your cashflow and create a realistic budget
Building on #1, adopting a spending mindset means having an intimate understanding of how much money comes in and how much goes out. You can start with a simple budget that focuses on your big expenses, or you can create a very detailed budget. I prefer to throw everything in, down to infrequent items like Christmas gifts. It may seem cumbersome at first, but once you have a comprehensive list of expenses, you will have a clearer picture of your finances
Step Three: Plan to succeed by making a financial plan
“Failing to plan is planning to fail” isn’t just a pat saying, it is a proven fact. Get your dreams out of your head and on to paper, a vision board, or electronically … whatever works for you.
Make a long range plan e.g. a plan for retirement (desired age, desired lifestyle, etc) and short range plans e.g. for a specific goal like buying a house. It’s ok if you don’t know all the hows of your plan; the first step is to bring it to life and then build on it.
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