Wes Moss: 10 exercises to get in better financial shape

Wes_Moss-for-Web-smaller-fiCertified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here weekly.

I received an invitation to be on Q100 FM’s Bert Show last week and was asked to provide ideas that could help anyone make 2011 a better financial year. The guidance I offered can help anyone, regardless of age or circumstance. And while I only had time to talk about three of the ideas on air, here’s the full list of 10.

1. Write It Down – Today is the first day of the rest of your financial life, which makes it the perfect time to write down your goals on paper. As the saying goes, if you don’t know where you are going, you’ll never get there. Make time to map out your course for 2011 (and beyond) in every area of your life, including personal finance. There’s a strange power in doing so, plus you can refer back to these goals over the years to make sure you are on track.

2. Go on a debt diet today – Yes, all that credit card debt does make your bottom line look bad. And it’s hurting your financial health. Start shedding it today. List your debts from smallest to largest. Focus all your resources on paying off the smallest, then move to the next biggest. Repeat until you are ready to reveal the strong, healthy, debt-free new you.

3. Make a budget – Budgeting is actually a simple and fascinating task that gives you a powerful tool for mastering your money. Forget the complicated personal finance software. Just sit down with a piece of paper (or a simple Excel spreadsheet) and start tracking where your money goes every month. Trust me, you will get the hang of it quickly, and it will highlight some really scary truths about how you spend your money. For example, do you limit yourself to two Starbucks runs per week – while driving more car than you need or can afford? Putting those figures down on paper will help you make some tough decisions.

4. Build a cash cushion – What if you lost your job tomorrow? Are you prepared? Would you have to move back in with your parents right away? Everyone should have an emergency fund capable of covering six to 12 months of core living expenses. This is the first and most important step to successful financial planning. It gives you the ability to SWAN – Sleep Well At Night.

5. Press on regardless – Yes, the financial world has been scary over the past couple years. But this isn’t the time to stop investing or cash in your 401k. Nor is it the time to attempt a big “score” based on a tip you got from that guy three cubicles down. Remember, slow and steady always does best in the money race. Get some advice you can trust, buy quality stocks and hold on to them. Consider something like the S&P Dividend Index Fund, a low-cost exchange-traded fund (ETF) that holds more than 50 high-quality U.S. companies that have consistently paid dividends in recent years (Symbol SDY).

6. Take the FREE money! – Sign up for your employer’s 401k program right now. In many cases, the company will match your contribution up to a certain percentage. That’s free money! Plus, research shows that such automatic savings plans – which take the money out of your hands before you can blow it – are extremely effective in helping people reach their financial objectives.

7. Cut costs – You’re the CEO of your life so start demanding some efficiency and accountability. There are countless ways you can reduce your daily and monthly spending. Renegotiate your gym membership, start using coupons (paper and online), pack your lunch a few days a week, buy a used car instead of a new one. Take all these savings and use them to pay down your debt and/or boost your savings.

8. Talk it out – Maintain open communication with your partner about every aspect of your financial situation. Sharing information as well as discussing goals and expenditures will reduce stress on the relationship and help assure that you are both rowing in the same direction.

9. Do what you love – The job market is slowly improving. If you aren’t happy in your work, now is the time to start planning for a new career. Decide where you want to be in five years, figure out how to get there and get going.

10. Should a house be your home? – There are nearly 4 million residential units for sale or in current “inventory” across the United States. That kind of glut creates a lot of great opportunities for buyers. But the housing market still hasn’t sorted itself out – and it will take a while before we see any real home price appreciation again. So, if the idea of owning real estate scares you, no problem, keep renting. Time is on your side.

Follow me on Twitter @WesMossWSB!

—By Wes Moss, for Atlanta Bargain Hunter

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January 24th, 2011
1:43 pm

It’s a shame that we need to be told that we need to save for ourselves in this country, but thanks for the efforts to keep us all educated…..

Bank of Ben

January 24th, 2011
1:56 pm

Ben Franklin never said “a penny saved is a penny earned”. He actually said “a penny saved is two pence cleared”. Taxes!

Golf Nut

January 24th, 2011
2:53 pm

Great advice and it is a piece that can be utilized by any age range… If we had people following these steps, maybe our fiscal situation would be a little better.