December 15, 2020

A New Year’s Resolution Idea

By Sylvia Salguero, Financial Advisor

How about making 2021 the year when you put aside all excuses you’ve used in past years and actually confront your finances? Maybe even contemplate a budget for the first time?

Despite the plethora of financial literacy articles, seminars, workshops, etc., many of us don’t know where we are financially at any given point, so it can be challenging to plan where we want to be in five or ten years from now, possibly even down the road in retirement….

Experts tell us that it is important to identify a starting point; calculating your net worth is a good way to gauge where you are at this moment.  Simply put, your net worth equals your assets minus liabilities.

Creating a list of needs and wants can help you set financial priorities. Needs are things you must have in order to live, such as food, shelter, clothing, healthcare and transportation.  Wants, on the other hand, are things you would like to have, but aren’t necessary for survival.  Being able to differentiate between the two, and being careful when making spending decisions is important to maintaining financial wellness.  Categorize your needs as well as your wants in order to clarify where your money should go first.  This applies to your current expenses, as well as to your long-term goals.  For example, saving for an exotic vacation is a want, while stashing money away for retirement is clearly a need.

Having the ability to assess your assets and your debts is a good way to start preparing for retirement.  Most people could tell you how much money they make in a year.  How many of us know how much we spend though?  That is where having a budget becomes important. If the word budget offends you, call it a personal spending plan.

Set aside all the excuses we all heard over the years such as: budgeting is too restrictive or I have no time for it or I am able to handle my money without it or I don’t have enough money to budget or I make too much money to need a budget, or I don’t know how to do it, etc, etc.

A budget forces you to write down your cash flow, what your income is, and your actual expenses, thus helping you to track your spending, so there are no surprises understanding where the money goes, what keeps you from achieving your financial goals.

Another obstacle to getting ahead financially may be too much debt. Most of us have some type of debt: mortgage and auto loans, student loans, medical expenses, etc. Debts can be costly, not only because of the fees and interest paid on them; they can interfere in a substantial way with your financial goals. If at all possible, it’s best to avoid them.

As mentioned above, a lot of information is available on the web; if you are not able to find anything useful, you can always ask us for guidance.

For a comprehensive review of your personal situation, always consult with your legal or tax advisor.  Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.