The New Year brings the promise of starting fresh in all areas of your life - including your finances. So to help you get your financial house in order, here are some ideas to get you started.
- Make a Family Spending and Earning Plan - It's difficult to manage your money if you don't know how much you have or where it is going. Get a clear picture of your finances and track monthly sources and amounts of income and spending. Your income must be more than your expenses for you to have opportunities to save for the future.
- Build a Cash Cushion -A study published by the National Bureau of Economic Research stated nearly half of Americans said that they definitely or probably couldn't come up with $2,000 in 30 days for an unexpected expense. Make sure you are preparing your household to cope with a financial emergency. Set up an automatic savings plan and build a cash cushion of 5-6 months fixed living expenses. More if you are concerned about your sources of income or have large planned upcoming expenses in 2012.
- Pay down credit card debt. According to creditcards.com, roughly 1 in 6 American households make the minimum monthly payment on credit cards. The average annual credit card percentage rate is 14.4% and the average household owes over $10,000 in credit card debt. With these statistics, it's easy to see how over 40% of American families are actually spending more money than they earn because of debt levels that they are unlikely to ever pay off. Commit to reducing debt which can help your monthly cash flow and your credit rating.
4. Save for Retirement - Look for ways to save and invest for retirement. Regardless, of if and when you think you will retire, you need to plan for a time when there will be a permanent reduction in your earnings. According to the 2011 Retirement Confidence Survey, only 42% of workers have taken the time and effort to complete a retirement needs calculation - the basic planning step that can help individuals determine how much money they are likely to need in retirement and how much they will need to save to meet that goal. Depending on your lifestyle, you may need substantial savings to supplement social security and to last as long as you potentially will.
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- Talk about money. People are more likely to discuss their health problems, their political views and their weight than money issues. An American Express poll found that nine out of ten married people avoid talking to their partner about money. Commit to stop dodging discussions and schedule weekly dollar dates to discuss your major family and spending goals and how you expect to pay for them.
The information provided is general in nature and may not apply to your personal investment situation. Individuals should consult with their chosen financial professional before making any decisions. Investment services are offered through Wells Fargo Advisors, LLC member SIPC. Neither Wells Fargo Advisors nor its financial professionals are legal or tax advisors
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