2015 is done, and here we are already at 2016.
I again remember the excitement when Yoda first shared so much wisdom.
It is all back again so I decided to look at some of the things he shared and relate them to our finances in 2016.
“Do or do not. There is no try.”
I need to write this on the inside of my glasses. Whatever your financial resolution is for 2016, when you use the word “try,” you are giving yourself an out. Commit to two financial goals and do them well. Experience success. Experience the commitment to stay involved with your finances; it takes some time to happen.
“That is why you fail.”
To become a master, recognize your personal financial truth and determine if you are living within your means. Ask those tough questions: How often do you eat out? Can you afford to send your child to the college of his or her dreams or is there another avenue? Is a vacation going to add to your debt? Are you an impulse buyer? What about your partner? How can you come to agreement?
“Truly wonderful, the mind of a child is.”
Toys, candy, games. Truly wonderful. As an adult, do you guide the child’s mind? Spend some, save some and share some? Setting expectations early establishes habits that will bode well as the child grows.
“Already know you that which you need. You will find only what you bring.”
Do you have a realistic idea of what you can spend on a monthly basis? Your take-home pay is what you have after deductions for taxes, health care, etc., and after you put money away for savings. If you don’t know what that number is, how can you know how much you can truly spend? If you commit to buying things on monthly payments, is there enough left over?
“Judge me by my size, will you? Size matters not.”
If you think you don’t make enough income to save money, then this is your reality. For 2016, be committed to your financial success. Find ways to save and pay off debt at some level. Will it mean taking a hard look at what you are spending on wants and on needs? Will it mean taking on a roommate, another job or finding creative ways to get the “needs” for less? It is not about the size of your income but rather how you manage what you have. The livable wages document for Southwest Colorado was recently released that spoke to the average expenses for household expenses. National recommendations are to save 5 to 10 percent of your income. In Southwest Colorado, perhaps this is not possible for you, but you can determine how much you can save, whether it be $10 a paycheck or $50. Value yourself by paying yourself first.
“Fear is the path to the dark side. Fear leads to anger. Anger leads to hate. Hate leads to suffering.”
Some people don’t budget because they don’t know what the numbers say. If you are living beyond your means, it can only be rectified if you embrace reality. What you don’t know will keep you broke and dependent. Financial literacy is financial freedom.
Did you know that the most important factor to a good credit history is making payments on time? People tell me they don’t check their free credit report (annual credit.com) because they “know it is bad.” The first step to owning your future is to know where you are and that no one has stolen some of your future. Own up to what you have done to know what you will do; know that your credit identity is safe and accurate. Unless you are anticipating a large purchase or change of insurance, job or rental, your credit score is not relevant, though your credit report is critical.
“Mind what you have learned. Save you it can.”
Have you had some significant conversations with your partner and your children? This is the time some parents and children are talking college Based on studies, there is a serious disconnect between how students and parents think the bills for college will be paid. The new FAFSA document is the starter. Three important things to realize are:
Tax benefits and fluidity of the 529 is important based on whose name is on the 529.
The average student who graduates with an undergraduate degree has more than $24,000 of debt. Keep it in the student’s name to benefit from the many repayment options available. Having college debt in a parent’s name merely creates a chokehold that does not go away and compounding interest can throttle retirement dreams.
Put the responsibility on the student, though help as you wish. Keep student loans at a minimum (tuition, books, room and board) rather than funding play time and trips.
“Fear is the path to the dark side.”
Once you know your path, stay the course. Automate your savings. People who save via direct deposit are twice as likely to build up their savings faster. Automate some payments and incorporate a process to review your bills weekly so you do not spend more.
Investors in the stock market have experienced roller coaster frustrations and cheers. Find your comfort level and stick to it. Look to the long term and get past the fear.
“Always in motion the future is.”
Build in some flexibility to your future. When an unexpected expense pops up, can you cover it? If you have emergency savings, can you pay a bill yourself rather than paying interest on a credit card bill. Recommendations vary as to how much you might need, but if you set a goal to have an amount saved that equals your essential expenses for two to three months, it can take a significant weight off your shoulders. When you draw money out, that is the first item to replenish before toys, trips or eating out.
“You will know the good from the bad when you are calm. If once you start down the dark path, forever will it dominate your destiny, consume you it will.”
Con artists benefit if you are emotional whether it is someone you know or not. Take the time to check it out. This includes checking out your financial adviser by going to www.brokercheck.finra.org
Is the government in control of your future or are you? Control what you can and start by educating yourself about money, budgeting and investing.
email@example.com or 382-6461. Wendy Rice is the family and consumer science agent for the La Plata County Extension Office.