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Use this year to get your finances in good shape

To say this year has been a tough one would be a tremendous understatement. We are all well aware of the list of failings and obstacles our country has faced. When the dust settles from any major challenge, we often look for a silver lining and what can be learned from what happened. We can then take steps to ensure that it’s unlikely the same mistakes will be made again.

Someone once said, “there is little we can do about the national economy but much regarding our personal economy.” Spending time on your financial health sets you up to handle the uncertainties of life. Here are some lessons to help you weather the next financial storm.

Reduce your debt load. When the economy and real estate markets are soaring, we often lose sight of this very important tenant. Ask yourself this simple question, “If I didn’t have as much debt and the payments that go with it, would I have an easier time meeting my goals and less stress in my life?” Work to rid yourself of consumer debt and make at least one extra payment on the mortgage this year. When considering purchases, follow these two simple rules. First, don’t take on debt for something that has little or no possibility of increasing in value. Second, if you lost your main income source and couldn’t keep up with the payments of all your debt for at least six months, don’t do it.

Start or increase your systematic savings. That means putting aside the same amount on a regular basis. If possible, try it before you pay other bills. I would suggest building an emergency savings equal to at least six month’s worth of expenses and save approximately 10-15 percent of your income each year towards retirement. Evaluate your spending habits. Figure out how much of your outgo is “discretionary” which you’ve chosen to take on and if it’s really necessary. Focus on sacrificing high consumption today for financial independence tomorrow. Real wealth is determined by what you save, not by what you make.

Maintain adequate protection for your family. This includes satisfactory amounts for medical, disability in case or premature death. What you’re buying here is peace of mind. The benefits from these should allow your family to maintain a similar lifestyle in case of an unexpected event. They shouldn’t have to worry about how to eat next week or if the bills will be paid.

Write down three to five items you want to accomplish in the next 12 months that will improve your financial health and put steps in place to accomplish them. Be very specific.

As I’ve said before: hope is not a strategy. Just putting them down on paper increases the chances of success.

Why not tape them on the bathroom mirror or to your desk at work? Constant reminders mean they will be foremost in your mind when faced with tough decisions.

Remember, people don’t plan on failing; they just fail to make a plan.

In the future, have an annual check-up to review progress, set new goals and gain motivation. It’s amazing how encouraging it is to continue a plan when you see the fruits of your labor.

Kris Flammang, co-founder of LPF Financial Advisors with offices in Lakewood Ranch, is a chartered retirement planning counselor and registered representative with Securities America, Inc. He can be reached at (941) 907-0101 or kflammang@lpfadvisors.com

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