By Janice Desautels (image by H. Kopp-Delaney)
Come March, our winter haze is clearing and we’re ready to be done with the cold and snow. Festive holidays are over; to some, a winter vacation was enjoyed, and to others, the new vacation year is about to begin.
While spring brings change, the bills don’t stop coming in, and tax time is here the same time every year – so how is 2015 going to be any different? How our year begins is in our control.
Make 2015 the year to take control and take stock of what you have now and for your future. Preparing a sound financial plan is about saving but it’s also about spending and managing your risk. The plan is the easy part; the execution is what’s difficult.
Spending is probably the easiest habit to get into, especially when we don’t think about the consequences – whether it is in the short-term of spending more than we earn, or long-term (not having enough money to retire).
Taking stock of what you’re spending now and what you’ll have to spend in the future can help to curb those unconscious impulses. Here are some tips on how to get started.
1. Be specific and write down what you spend. Be focused on your money and know where every cent goes.
2. Know your precise limits of spending and don’t exceed them.
3. Review your current spending and determine how that impacts your ability to save.
4. Determine how much you need to live on now. Will this be the same in three to five years, and five to ten years? If not, how will you reduce your spending to offset those increases?
Saving is the solid foundation to every financial plan, yet runs parallel to spending. And it isn’t such an easy task to balance the two if you are not in the habit. Depending on your income and future wants and needs, spending may have to take a back seat for a while. Getting into the habit of saving takes focus and motivation, because you are looking forward to an outcome that isn’t tangible in the present moment. The impact that saving for a future goal may have on your present lifestyle can be minimized in a few ways.
Start today. The earlier you start saving, the more time your money has to compound for future gain.
Is your income growing, or do you have the potential to earn more? By not spending more than you earn now, every increase can be put aside as savings and you won’t feel the impact.
Save your tax refund. This is about the time we start thinking about what that refund might look like. A course correction is needed if you’re thinking about spending it on a consumable item. Planning and preparing to save it well in advance of knowing the amount increases the likelihood of success.
Last but not least, your ability to earn an income is the most valuable asset you have. If something happened to you and that income stream was interrupted or lost, where would that place you and your family financially? Protecting against that risk is crucial, so review or re-evaluate your position. The “young you” needs to take care of the “old you,” so be mindful of your future responsibilities and start your plan today.
Janice Desautels has been working with families and individuals for the last seven years helping educate in the field of financial literacy. She is a Certified Financial Educator with over 15 years of experience in teaching and training adults.