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The Top 10 Tips for Starting a Financially Sound 2010!

January 2, 2010

If the goal is to manage your money better in 2010, you’ll want to start here.

When you’re making your New Year’s resolutions remember a plethora of people are currently facing difficulties in covering monthly expenses and paying bills, the majority don’t have “rainy day/emergency” funds set aside for financial emergencies and only 41 percent of parents have set aside money for their children’s college education.

Take a look, study and commit to memory 10 tips that are sure to aid you in your quest to build financial security for the new year and beyond.

1. Determine What You’re Worth. The first step to getting your finances in order is knowing exactly what you’re worth. Just like any map you have to know where you are in order to know where you’re going.  The first step is to list what you own – money in bank accounts and retirement plans, the value of stocks, bonds, investments and life insurance, the equity on your home and other property such as cars or objects of value, and then determine what you owe – outstanding mortgage balance, auto and student loans, and credit card debts. The difference, positive or negative, is your net worth.  The key here is to understand what is an asset and what isn’t and asset.

2. Let a Budget be Your Guide. It’s key to make a budget at the start of each year. We have to have a road map for our finances or we will be lost before the year gets started.  Show all real income from paychecks (Net not gross), retirement accounts, investments, housing and other expenses. Be honest and realistic with yourself about miscellaneous spending like food, because it will bite you in the end.   Use tools such as Quicken or other software to input your budget and monitor it as the year goes on, but a good ole notebook will even do the trick if you’re technology adverse. As your situation changes (new job or between jobs), adjust your budget. It’s a great reality check for managing your money and keeping your financial house in order.

3. Change your mind set about money. I say it often, “Change your Mind, Change your Life”.  This is true for the way you view money also.  Don’t take your money for granted. Since transactions are electronic, you don’t get a check in your hand anymore or even realize how much you’ve put on that credit card. Money is real; it doesn’t take care of itself and requires your full and constant attention.

4. Know the score when it comes to your credit. Check your credit reports for FREE annually. I recommend you check it twice a year, once at the beginning of the year or 1st quarter and again in August or September.   Visit www.annualcreditreport.com or www.quizzle.com and monitor what the report shows. Make corrections as needed. And don’t forget to always follow the basic rules for handling credit well – pay your balance in full whenever possible, use your cards with caution, carefully read all information sent to you by your credit card company and always check credit card statements for accuracy.

5. Save. It’s not always easy to find money to put aside, but save something even if it means cutting back on some expenses. Put a small amount away directly from your paycheck into a savings account each month to serve as your “rainy day” or emergency fund. Increase that amount whenever possible.

6.  Control your spending.  You have to name your dollars as soon as you get them.  By this I mean tell the money where it’s going, don’t let it tell you where it will be spent.  Weather it’s being used for savings, debt reduction, bills, or frivolous spending the key is to know where it going.  This simple tactic help you remain in control

7.  Plan for retirement. Understand all the retirement options available to you – 401(k) or other plans available through your employer or action you can take on your own like contributing to an IRA. Make sure to at least contribute the maximum amount that an employer will match; for example, if there is a match for up to 3% of pay deferred, defer at least that amount. Don’t miss any opportunity to save for your retirement; start saving as soon as you can and as much as you can.

8. Keep records in order. Being a good record keeper helps to make tasks like doing your income taxes or completing a loan form easier, and saves you time and money in an emergency. Know where to easily find all important documents including birth certificates, property deeds, insurance policies and wills. Let a trusted family member or friend know their location.

9. Ask questions. Compare terms on credit cards, check what your bank is charging in ATM and service fees, and watch for shipping and handling fees on purchases. If you don’t understand a term on a bill, lease, bank statement, loan form or sales agreement – ask questions. Most importantly, ask for help when you need it.

10.  Set goals. Working towards something you really want – a home, a car or simply paying off all your credit card bills or student loans – can provide motivation to put more time and energy into money management.

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8 Comments leave one →
  1. Pat Harris permalink
    January 2, 2010 12:34 pm

    I wish Icould save 50% , most people can’t save any % at this time. The money in my saving account is always transferred to my checking account to cover my weekly bills. My job was outsourced and the job I have now is$800.00 less per month. I am a widow and a single parent with a son in college. I would love to have some counseling on how to save more .

    • January 2, 2010 2:04 pm

      Most people are not able to save 50%, but I’ve worked really hard to be able to do this. It takes a lot of discipline, plus multiple streams of income. It becomes even more difficult when you get a pay cut. I’d love to share some tips and tactics with you. Email me at clydespeaks2u@gmail.com with some specific questions.

      • Dan permalink
        March 12, 2010 11:05 pm

        Hello Chris,

        When I last wrote to you in a post to this section on January 02, 2010, I accidently reversed two numbers which may have confused some readers. (My 01/02/10 post accidently read: “My wife and I currently save/invest over 68% of our net income per year. This works out to approx 75% of our gross pay in our particular situation. (This is not a typo. 68 & 75% are accurate numbers.”)

        Well, now that everything has been tallied, adjusted and completed for 2009, I want to share the following as of March 12, 2010:

        We were able to save & invest 54% of our 2009 pre-tax income, an amount that equates to 69% of our after-tax income. We don’t make huge money and we strive to live on less than one paycheck. Our expenses came to approx $27,000 in 2009, the lowest expense figure we have had since 1998! Our goal is to continue our saving/investing plan until retirement. From that point we plan to save at least 25% of our retirement income so that we can continue along the same track, albeit at a slower pace.

        Again, kudos to you for having the courage to publicly announce that people should strive to save as much of their income as possible. It is not always easy but the results are so worth the effort!

        A full decade of this effort has brought us to a point where we are looking at retiring not 20 years down the road, but perhaps 3 years down the road. I will be 45 years old this fall. Not bad, eh? Lots of discipline and multiple income streams are also necessary for this to happen, and we are increasing each stream every year.

        Keep up your fine work! As you say, “Change your mind, change your life.” All the work is worth the effort.

        Dan

      • Dan permalink
        March 12, 2010 11:11 pm

        Hello Clyde, I must apologize for typing the wrong name in the subject line. Chris, a good friend of mine, is working on a similar plan and he was on my mind as I was typing to you. That’s why I wrote “Chris.”

        Actually I am glad that this happened because it illustrates an important point: mistakes can happen. In relation to saving and investing, there is an even greater point: when you are saving over 50% of your income, you can afford to make a few mistakes along the way. My wife and I have made plenty of mistakes along our road to retirement, but it is amazing that when you save a lot, emergencies and mistakes are more easily handled.

        All the best and keep up the good work!

        Regards,

        Dan

      • April 3, 2010 3:06 pm

        Thanks for the correction Dan. You guys are doing a fabulous job! You make a great point. I think planning for emergencies and unexpected incidents is key, because it is inevitable that they will occur. It’s a lot easy to handle and less stressful if you’re prepared.

        Thanks for sharing! We’ll have to use you guys for a case study one day 🙂

        Clyde

  2. Rupel Marshall permalink
    January 2, 2010 12:39 pm

    Thank you for the financial tips. I think that having a road map is a great way to gain financial independent. What are yout toughts on investing in mutual funds

  3. January 4, 2010 6:11 pm

    These are all very sound pieces of advice. But the real deal is this advice holds if you believe that there is a system and if you believe that the system is for the little guy. There is no banking system at the moment and there is no, nor has there ever been a Federal Reserve. http://www.federal-reserve.net/
    We, the little people, have been victimized by a system that feeds itself. I have had 45 years of perfect credit – and yet I can’t get a break. Donald Trump said the other day that without a banking system we have no way to build America. Even He can’t get a loan right now. The system has allowed masses amount of crooks to prosper. So we can all go back and drink the Kool-Aid and play in the system or open your eyes and play by your own rules. Community Banks and alternative investments – the kind you can touch like art, real estate or business investing is more sound.

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