Stacy Livingstone-Hoyte, AFC®, is an experienced financial counselor who has worked extensively with U.S. Armed Forces members and families. She is a long-time volunteer blogger for Navynavstress.com and previously served at the Fleet and Family Support Center, Millington, Tenn. as a financial counselor. As a military spouse, Ms. Livingstone-Hoyte knows firsthand of the financial challenges and opportunities that face military families across the globe. To that end, she embraces a steadfast belief that financial success can be simple, just not easy. –NavyNavStress.com note
Did you resolve to be a better steward of your hard earned money in 2015? If so, over the next month or two, you may feel bittersweet at times…you feel empowered by your financial progress, and then the holiday shopping bills arrive. You are not alone, and with focus, you will prosper. This is the kind of stuff that life is made of; equations or solutions of a sort. Personal money management can be as simple as this equation:
(Saving Money + With Consistency) – Reducing Debt = A Measure of Financial Success
This is no mystery here, but this success equation demands that there is resolve! This is the kind that forces planning and demands daily attention to your spending habits. And this is precisely what a New Year can bring! To live this type of equation, we must know what our current money status is, set goals, set realistic plans, and determine what success will look like for you. Here are a few tips to help you find the right equation to achieve resolution in your own finances:
Gather Your Numbers: This is post-holiday stop number one! Gather the most up-to-date account information about your assets and debt obligations. One way to do this is with a simple Excel spreadsheet where your column names are the name of the creditor, the total balance, minimum monthly payment and interest rates. This will help identify your net worth and create a viable budget.
Create or Touch-Up the Budget: Consult with a subject matter expert or your household financial partner to construct a realistic portrayal of how you allocate income, savings, investments, expenses and debt payments. Take time to reflect on the results of this assessment and breathe a deep sigh of relief for having created a living budget.
Goal & Plans: Having the previous information in hand, set realistic goals and plans to span the next 12 months and beyond. Resources such as www.powerpay.org or the Navy Electronic Financial Planning Worksheet can help you determine a payback method best suited for you, whether it’s placing your initial focus on debts with the highest interest rate or following a snowball method where you pay off debts from the smallest to largest. Conversely, if your goal is to build your savings arsenal, prioritize your emergency savings above other budgetary goals, as this is the number one stressor in personal financial planning. While three to six months’ worth of expenses and debt payments are recommended as a fairly sufficient emergency fund, a more attainable goal for many is to start with a smaller goal of at least $1,500. For a more in-depth discussion on debt reduction resources, refer to my blog from August 2014 where we discussed tips and resources to resolve your debts.
Any long term goal should always reflect your current capabilities and realistic expectations for the future. If you plan to save up money for future purchases, set realistic expectations on the total amount of money needed and the timeline to accomplish. If your goals involve investing, ensure that you have first established sufficient liquid funds and have the ability to pay off any outstanding consumer debt.
Monitor & Revise: It is equally important to monitor the progress you have made towards your goals. As challenges and opportunities arise, adjust your initial plans. A windfall of cash, such as tax returns, present a unique opportunity to compromise between paying off debts, saving and spending. Conversely, when the unexpected happens, such as car repairs, revisit your financial plan quickly so that any lost momentum can be regained.
Credit Check: The start of each new year is an ideal time to review your personal credit report. Federal law allows each consumer to obtain their free credit report from each of the three major bureaus (Equifax, Experian and Transunion) once per year. (Remember, this report will not include your credit score, which is requested separate, and sometimes with a fee.) One strategy to monitor your credit report more than once per year is to pull your report from one of the bureaus in January, a second bureau in four months later, then the third report from the last bureau another four months later. You can go to www.annualcreditreport.com for additional details.
Make 2015 the year you resolve to focus on your finances! If you need assistance from a professional, contact your nearest Fleet and Family Service Center, Command Financial Specialist or Military OneSource representative for free advice.