Fiscal Fitness

It's another year, another series of resolutions. Each year many of us make goals to lose those extra pounds, spend more time with our family or just take time to enjoy life more. One goal that often gets put off year after year is our financial fitness. Cognitively, we know financial fit- ness is a simple math problemspend less, save more and get out of debt. It’s a problem so easy to quantify, and yet, incredibly difficult to accomplish. Money is more than a means of paying for things. Money is emotionally tied up in our personal history, memories, habits and reward system. Often, we forge ahead on the problem and settle on a budget – an unrealistic, overly stringent budget. And it fails. And we give up. So, how should we start? 

BUDGETING
First, we have to realize what money means to us. What role has it played in your life historically? Was spending highly encouraged in your house? Or was money never dis- cussed? Do you enjoy spending money, or does it bring you stress? Do you think your attitudes toward money are completely healthy, or should you step back to re-evaluate its im- portance in your life?
Once you walk through these questions, you can anticipate emotional roadblocks and approach your fiscal fitness goals with a much greater probability for success. Start by categorizing your spending habits for at least three months. Find out where your money is going; you might be sur- prised. Is dining out a larger portion of your spending than you thought? Or is your daily coffee habit adding up to a surprising annual amount? After you have a sense of what you spend, build a budget.


PLANNING AHEAD
Now that you know where your money is going, you should direct it where it needs to go. Take time away from distractions to really think about your retirement. What are you doing? Traveling the world? Volunteering? Work- ing part time? Envision your retirement lifestyle and write down what monies are needed to fund it. If your house is paid off by retirement and you plan to stay in your current locale, your living expenses may drop significantly. If the lifestyle you envision involves greater expenditure than your current lifestyle, factor that in. Consider your health and health care expenses. If you plan on retiring prior to your Medicare age, will you need health insurance to cover that gap period or “self-fund”?
Once you’ve estimated your retirement expenditures, determine the kind of asset base necessary to produce that amount of income. Will you receive Social Security, invest- ment income or part-time employment wages? Americans are living much longer than a few generations ago, which means you may have to plan for a long retirement! You should consult your financial advisor to help you consider each scenario and look at all your options. 

REDUCING DEBT
Once expenses are understood, a budget is in place and a retirement goal is set, you need to eradicate existing debt. If you have multiple debts or credit cards to pay off, start with the smallest debt first – regardless of the interest rate – and pay it off over time. Then, take those payments formerly used for the first debt and apply them to the second, and so on. This simple approach takes interest rate calculations out of the picture, which leads to faster emotional progress and re- wards, and ultimately helps you stick to the plan. When all debt is tackled, dedicate cash flow that formerly went toward debt to an emergency fund. And then, start maximizing your retirement savings.

Just as many people who lose weight and keep it off use a trainer to keep them on track, working with an advisor you trust can help you stay on the right track to reach your financial goals. By creating and sticking to a plan, you can look for- ward to your future with less stress!