Winning With Your Personal Finances

As you watch the nightly news or read the local newspaper, we are constantly hit with negative information about the economy and the tough times we are in.

Over 70% of adults in America are living paycheck to paycheck and the national average for savings in America is (-1%). 

Charting a course to ensure you are financially sound begins with careful planning, implementing good strategies, and always being alert to potential obstacles and opportunities that might be coming in the future.  Dave Ramsey says that personal finances are 80% behavior and only 20% head knowledge.  The next few articles will help you develop healthy spending habits and give you some easy but effective financial strategies to help build a solid plan to win with your finances.

Here are the steps that many financial coaches are using to help people design a long term plan for their finances.  The best part about this plan is that it works both in good times and in bad times.

Step 1:   ASAP save $1,000-$2,500 in your “Emergency Fund”.

Step 1½:  Develop a written budget that can be easily followed.

Step 2:  Pay off all debt using the “debt snowball” method. (Except your home)

Step 3:  Build up your Emergency Fund to 3-6 months of living expenses. 

Step 4:  Invest 10-15% of your income into retirement.

Step 5:  Fund your children’s college tuition. 

Step 6:  Pay off your home early. 

Step 7:  Build Wealth, Give, and Change Someone’s Life! 

The emergency fund is the foundation to your financial plan.  It will allow you to move forward with your other steps without taking money from one category and using it for those unexpected financial situations like new tires for the car or repairing the water heater.  This also helps remove dependence on credit cards for those “emergencies.” Once you have raised the $1,000-$2,500, keep this money in a place that you can easily get to for an emergency, like a regular savings account, an online savings account, or a money market account with check writing privileges.  Only after you have your emergency fund established, you should move to the next step. 

Here are some strategies for building your emergency fund.

1. Make it your highest priority for the next 3-8 weeks to build your emergency fund.

2. Have a yard sale. 

3. Cut back on some variable expenses, such as entertainment, clothing, house projects, vacation, gifts, or fun money.

4.  Sell something on Craig’s List or in the newspaper that other people see as valuable. Jewelry, an older car, baby items, or used furniture are potential quick sales. 

5.  Get another part time job.

Imagine what your finances will look like after 6 months to a year if you get seriously intense about your finances.  I leave you with this quote from Frank Tyger who said, “Your future depends on many things, but mostly yourself.”

Next month we will look at developing a written monthly budget.

Let me know what some of your strategies are to build your emergency fund.  You can email me at ed@finnertyfinancialcoaching.com