It’s that time of year when everyone starts thinking about what their new year’s resolutions are going to be. Every year, I set goals for all areas of my life, from financial, to career, to physical. I typically write 1 year and 5 year goals.
Do you know what your goals are for 2012? If not, sit down and figure out what you want to accomplish this coming year in your financial life. The best place to start is by creating a statement of financial position. Basically you list all of your assets on the left side of the paper and your liabilities on the right. Subtract assets from liabilities and you have your net worth. I like to list liabilities with the largest at the top of the financial statement. Here is an example of a “statement of financial position.” Create a “statement of financial position” for the start of 2012 and another one at year end to measure your progress. I typically create a “statement of financial position” on a quarterly basis in order to track my progress.
If your goal is to get out of debt in 3 years, then figure out how much you need to allocate towards paying your debts to meet that goal. Visit our recommended source for creating debt repayment plan here. If you have multiple debts, enter each one with the corresponding balance, interest rate, and monthly payment and the time you wish to be debt free. The calculator will tell you how much to pay each month to meet your goal. Commit to paying what you need to meet your goal, and track your progress by creating “statements of financial position” on a yearly, quarterly, or monthly basis. As you pay down your debt it will be reflected in your financial statement by an increasing net worth.
If your goal is to save more money, the most effective method I’ve discovered is to set up automatic payments to savings accounts. A very effective method is setting it up through your employer to have a certain dollar amount deposited in your savings account. It takes no discipline and you won’t miss the money. You’re net worth increases as you increase your savings.
If your goal is to invest, start with your 401k plan. Are you investing enough to get your employers contribution? If not, increase your 401K contribution until you get the full employer match. Anything above and beyond should be invested into a Roth IRA. A Roth IRA allows you to invest “after tax” dollars, but the money grows tax free and withdrawals are tax free upon retirement. Another great investment that I’ve profited tremendously from is silver. It’s a great investment because it is cheap enough right now for the average person to buy and prices are expected to climb.
Well there’s 3 tips to helping you get on the right track financially for 2012. What are your goals for the coming year? Which will you focus on the most?