A new year offers a fresh start and an opportunity to reevaluate your financial goals and your progress towards reaching them. Here are some sensible ideas to help improve your chances of achieving financial success.
Take good care of yourself. For most of us our greatest financial asset is our ability to earn a living. Eat healthy, exercise and keep improving your job and career skills so you can continue to work and advance. For those approaching retirement or already retired, staying fit and healthy should be your most important priority. It is essential for an enjoyable and successful retirement, and lower medical costs means more money for the things you want to do.
Organize your financial affairs. First, establish your goals. Prioritize them by importance, determine when you want to reach them, estimate how much they will cost and what you’ll need to save each month. You need to know where you want to go to figure out how to get there.
Second, determine where you stand today financially. You can’t develop a plan to reach your goals if you don’t know where you’re starting from. This is the only way you can make sound financial decisions. Constructing cash flow and net worth statements will enable you to do this. The cash flow statement tells you what you earn and spend and how you earn and spend it. Look for non-essential expenses that can be reduced or eliminated. The net worth statement is a snapshot of what you own and what you owe. The difference between the two is your net worth. Comparing your net worth annually will give you an idea of how well you are progressing toward your goals.
Third, establish a recordkeeping system for your personal and financial documents. Keep it simple so it is easy to maintain and accessible, so you or your family can quickly get your hands on important paperwork.