Where Did It Go?

Do you find that you ever have too much month at the end of your money? Be honest, in the blink of an eye, extra money seems to vanish. For those still in their earnings years, one of the keys to accumulating wealth, thus achieving your financial objectives, is to stop the disappearing act. Transfer dollars from your monthly cash flow to your net worth statement by adding funds to your savings accounts, taxable investment accounts, and retirement accounts (such as employer sponsored 401k and 403b accounts) and IRA’s (Traditional or ROTH).  Another smart move is to use funds from your monthly cash flow to pay down debt … also improving your net worth statement.

Saving money and improving your overall financial position is easier said than done.  The truth is that saving money is more than simply a function of dollars and cents; it requires discipline and perseverance.  You may have heard the strategy of “paying yourself first”.  The most effective way to pay yourself first is to set up automatic savings programs.  The 401k (or other employer plan) is the best way to do this – but you can also establish similar automated savings plans with brokerage companies and financial institutions such as banks or credit unions.

Just as important, be intentional with your 2012 spending.  Rather than thinking in terms of a budget (which sounds a lot like dieting) – think about establishing a “spending plan” instead. Planning your expenses as best you can will help ensure that you spend money on the things that add value to your life and should help keep your money from mysteriously vanishing at the end of the month.

For a free resource to help track your cash flow email: Timothy.Wyman@CenterFinPlan.com

Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

Keep Score with Your Own Net Worth

In my January 4, 2012 post I shared nine steps to get a start on improving your financial health in the New Year.  At the top of the list was:

Take score: review your net worth as compared to one year ago

I must admit, I don’t find myself playing too much golf these days.  However, when I do, I keep score to see how I am doing. A net worth statement is your financial scorecard.  In its simplest form, your net worth statement lists what you own, subtracts what you owe, and the balance is called your Net Worth.  While there is no ideal Net Worth, it certainly is better to have a larger positive Net Worth – thus owning more than you owe.  Next to establishing personal financial objectives, an evaluation of what you own and owe is probably the most important ingredient in creating a plan your financial future. 

From the information contained on your Net Worth statement, you can measure whether or not you have sufficient liquidity, calculate your debt/equity ratio, review the nature and diversification of your assets, and determine the impact of federal estate taxes on your estate.  Your Net Worth statement is also used in your Financial Independence analysis and in evaluating your insurance needs.  With proper planning, discipline and careful monitoring, your Net Worth is likely to appreciate in value over time. 

Even in a year when investment returns are flat, your net worth can increase if you are saving money and/or paying down debt such as a mortgage, college loans, auto loans, or dreaded credit card debt.  There are many resources online to help you keep score.  Even better yet, you can work with your financial advisor to begin tracking your progress.