Close your eyes and visualize your dream vacation or the shiny new car that you’ve always dreamed of having. Sure, looks great. Unfortunately, for many of us, dreaming never gets to the planning stage. With a little planning and discipline the likelihood of achieving our goals can be dramatically improved. Consider implementing one, if not all, of the strategies listed below to improve your financial picture.
n Write down your financial goals and objectives and include deadlines. Monitor your progress toward your goals. This will help you stay focused.
n Use credit cards as little as possible. Financing your lifestyle with credit cards is a trap. Reach for your checkbook instead.
n Pay off your credit cards each month. With the new minimum payment requirements of around 4 percent, consumers will get out of debt quicker. For example, on a $2,000 credit card bill at 18 percent interest, paying the former 2 percent minimum will still leave you paying 30 years from now.
The interest will cost you over $5,000 on the $2,000 charge. By making the new 4 percent minimum payment, you will finish up in about 10 years and the interest will be roughly $1,100. As a very wise man once told me, “you don’t create wealth by paying interest to someone else, you create wealth by earning interest.”
n Spend a little, but save a little more. As your debts are paid off, save the “extra” cash each month. This is an expansion of the “pay yourself first” idea. Many people are tempted to overspend that “extra” cash.
n Keep a cash balance of at least six months of living expenses. This cash cushion can be used when emergencies do arise instead of charging on credit cards or trying to sell assets.
n Map out a college savings plan and begin funding as early as possible.
n Manage taxes early in the year and look for deductions, credits and deferral of income to reduce your tax bill. The tax savings can be used for other goals.
Go for steady, consistent, long-term growth in your investment. By the time you read about a “hot tip” it’s usually cold.
n Protect your valuables and income earning potential with appropriate insurance policies including mortgage, life, and disability policies.
n Invest for retirement. At best, Social Security will cover only a fraction of the money you will need for retirement. Talk to your financial adviser about preparing for a comfortable retirement.
n Create an estate plan. Many people think you must be super wealthy to do estate planning, which is not true. Avoiding probate and passing assets to heirs estate tax free, are the main goals.
Your financial adviser, CPA and attorney will be able to assist in reaching all of these goals. As the saying goes, “those that fail to plan, plan to fail.” It’s never too late to begin taking a look at your financial picture and get on board with a real plan for you and your family’s future.
Michael T. Ohlman, a certified financial planner and senior vice president of financial planning and wealth management specialist in the Bradenton office of Raymond James and Associates, Inc., can be reached at (941) 907-0168.