Here are a few simple steps you can take to improve your finances this year.
Step 1: Start by getting out of debt.
Not only does carrying debt mean you could end up paying a ton of interest over time, but it also takes away from money you could save and invest for your financial goals. If you decide that 2013 will be the year you tackle any debt you have, then check out www.PowerPay.org, a free resource to help you develop a debt repayment plan.
Step 2: Make sure you have a cash reserve.
If you don’t have an emergency reserve, then make 2013 the year you start one. The rule of thumb is to have between 3 and 6 month of living expenses saved, but don’t worry if you can only put away a little bit of money to start. Since most high-interest, “pay day” loans are for less than $500, even a small amount of cash can save you in an emergency. You can use www.DepositAccounts.com or www.BankRate.com to find high-yielding savings accounts and CDs to hold your cash.
Step 3: Start investing.
If you’re new to the world of investing then the easiest place to start is with your company’s retirement plan. If your company doesn’t have a retirement plan, then you could start an IRA or Roth IRA at a company that offers commission-free mutual funds. Even if you're already investing in your company's retirement plan, it's a good idea to start additional savings in an IRA, Roth IRA, or taxable investment
account to supplement your retirement savings. Consider starting with a “target date” or “asset allocation” mutual fund that will give you instant diversification with a single investment.
Step 4: Get a second opinion.
If you already have investments, you might benefit from sitting down with a professional to discuss things like your asset allocation, individual holdings, tax management, or risk reduction. Keep in mind that someone that earns commissions will have an incentive to recommend changes, so look for an advisor that works on a fee-only basis and never accepts commissions from his or her recommendations. You can go to www.NAPFA.org or www.GarrettPlanningNetwork.com to find a fee-only advisor
To learn more about our company - and find out how we are different from other financial advisors - visit www.VannoyAdvisoryGroup.com or call us at (210) 587-6433.
Showing posts with label cash reserve. Show all posts
Showing posts with label cash reserve. Show all posts
Monday, December 31, 2012
Saturday, September 8, 2012
Five Steps To Financial Readiness
Some of the work I've done over the past few years has involved working with the military. Along with providing individual consultations, I've also had the opportunity to conduct briefings (i.e. presentations) to groups of Servicemembers.
I usually wasn't asked to discuss something specific like "budgeting" or "debt", so over the years I developed a briefing that covered a variety of topics in order to cover as much ground as possible. This is a short version of my "Five Steps To Financial Readiness" briefing.
Step 1: Determine Your Current Situation
The best way to determine your current financial situation is to complete a personal balance sheet that lists your assets and liabilities. You can find sample templates online, but the easiest thing to do is to take a sheet of paper, draw a line down the middle, and list everything you own on the left and any debts you have on the right. Think of a balance sheet as a "financial report card" and complete one regularly to track your progress.
Step 2: Deal With Debt
Ignoring any debt you have on your balance sheet will won't make it go away and will almost always make it worse. The website www.PowerPay.org is a free resource you can use to come up with a personalized debt repayment plan.
Step 3: Start A Cash Reserve
You should set a goal of saving at least $1,000 in an emergency reserve even if you're working on paying off high-interest debt. If you don't have bad debt to pay down, then set a goal of saving between three and six months of living expenses. You can go to www.BankRate.com to find a fee-free high interest savings account to use as your reserve.
Step 4: Review Your Credit Report And Score
I usually wasn't asked to discuss something specific like "budgeting" or "debt", so over the years I developed a briefing that covered a variety of topics in order to cover as much ground as possible. This is a short version of my "Five Steps To Financial Readiness" briefing.
Step 1: Determine Your Current Situation
The best way to determine your current financial situation is to complete a personal balance sheet that lists your assets and liabilities. You can find sample templates online, but the easiest thing to do is to take a sheet of paper, draw a line down the middle, and list everything you own on the left and any debts you have on the right. Think of a balance sheet as a "financial report card" and complete one regularly to track your progress.
Step 2: Deal With Debt
Ignoring any debt you have on your balance sheet will won't make it go away and will almost always make it worse. The website www.PowerPay.org is a free resource you can use to come up with a personalized debt repayment plan.
Step 3: Start A Cash Reserve
You should set a goal of saving at least $1,000 in an emergency reserve even if you're working on paying off high-interest debt. If you don't have bad debt to pay down, then set a goal of saving between three and six months of living expenses. You can go to www.BankRate.com to find a fee-free high interest savings account to use as your reserve.
Step 4: Review Your Credit Report And Score
Almost everyone looks at your credit report and score these days, so it's important to review your reports for signs of identity theft and make a plan to improve your score if it's low. You can get free copies of your credit reports at www.AnnualCreditReport.com and get suggestions for improving your score for free at www.CreditKarma.com. Go to www.FTC.gov if you've been a victim of identity theft.
Step 5: Plan For Future Goals
Once you've covered the basics you should start planning for financial goals like college expenses for your children, purchasing a home, and retirement. Websites like www.BankRate.com and www.SmartMoney.com have great articles about planning. If you want personalized advice, you can go to www.NAPFA.org or www.GarrettPlanningNetwork.com to find a fee-only financial advisor that never receives sales commissions from his or her recommendations.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
Monday, March 28, 2011
5 Steps for Financial Success
Step 1: Spend less than you earn.
Spending less than you earn is the starting point for doing well financially. Anytime you find yourself trying to keep up with the Joneses, remember what Dave Ramsey says, “If you will live like no one else now, later you can live like no one else.”
Step 2: Don’t be cash poor.
A cash reserve can protect you (i.e. keep you from casing in investments or accumulating debt) when you face an unexpected expense like car repairs, home maintenance, etc. Having cash on hand is also a good way to make sure you can take advantage of any unexpected opportunities or investments that come your way.
Step 3: Accumulate the right types of assets.
When building your net worth, focus on accumulating assets that (1) are likely to appreciate and (2) can be converted into income later in life. It might feel great to have an expensive house that’s paid off, but if you don’t accumulate sufficient investment assets, you might have to sell your home later in life to fund your retirement. If you live in it, drive it, or wear it, then it’s not the right type of asset.
Step 4: Don’t forget the little things.
Many Americans have unsecured debt like balances on credit cards. Debt like this is often accumulated gradually – rather than all at once – until one day it seems too large to handle. Think twice before using your card to charge for spontaneous purchases. Make sure you actually have money to pay for it.
Step 5: Keep it simple.
When it comes to finances, “complicated” doesn’t always mean “better”. Be leery of any investment requires you to sign complicated contracts, disclosure documents, or suitability statements. There are plenty of straightforward, easy to understand savings and investment vehicles available to investors.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Spending less than you earn is the starting point for doing well financially. Anytime you find yourself trying to keep up with the Joneses, remember what Dave Ramsey says, “If you will live like no one else now, later you can live like no one else.”
Step 2: Don’t be cash poor.
A cash reserve can protect you (i.e. keep you from casing in investments or accumulating debt) when you face an unexpected expense like car repairs, home maintenance, etc. Having cash on hand is also a good way to make sure you can take advantage of any unexpected opportunities or investments that come your way.
Step 3: Accumulate the right types of assets.
When building your net worth, focus on accumulating assets that (1) are likely to appreciate and (2) can be converted into income later in life. It might feel great to have an expensive house that’s paid off, but if you don’t accumulate sufficient investment assets, you might have to sell your home later in life to fund your retirement. If you live in it, drive it, or wear it, then it’s not the right type of asset.
Step 4: Don’t forget the little things.
Many Americans have unsecured debt like balances on credit cards. Debt like this is often accumulated gradually – rather than all at once – until one day it seems too large to handle. Think twice before using your card to charge for spontaneous purchases. Make sure you actually have money to pay for it.
Step 5: Keep it simple.
When it comes to finances, “complicated” doesn’t always mean “better”. Be leery of any investment requires you to sign complicated contracts, disclosure documents, or suitability statements. There are plenty of straightforward, easy to understand savings and investment vehicles available to investors.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Sunday, March 7, 2010
Cash Reserves
This is from one of my recent weekly "Smart Money Monday" Segments on Waco/Temple/Killeen NBC affiliate KCEN 6.
Why is important to have a cash reserve?
You should have a cash reserve for three reasons: (1) to avoid running up credit card debt to cover unexpected expenses, (2) to have funds on hand to cover your living expenses for a while if you lost your job, and (3) to have money available to take advantage of an investment or other buying opportunity.
How much should someone keep in a reserve?
A good rule of thumb is to have from 3 to 6 months of living expenses in a reserve. If your income is steady and your job is secure, then 3 months might be fine. But if your income fluctuates or your job isn’t secure, then you should err on the side of caution and build a larger reserve.
How should someone balance the need to keep the funds liquid so they can be accessed quickly with the desire to earn higher returns?
Your cash reserve should have several levels in order to strike a balance between liquidity and higher returns. Consider using the following types of accounts and investments for your reserve funds:
Checking Account – Keep enough in your checking account to avoid bouncing checks and overdraft fees.
High Yield Savings or Money Market Account – This should be the next level of your reserves and can be kept at your local bank or online. Make sure it’s linked to your checking account so you can transfer funds back and forth easily.
Certificates of Deposit (CDs) – CDs earn higher interest rates but most have early withdrawal penalties. You can ladder CDs so you have one coming due every month, quarter, or semi-annually depending on your needs.
No-Load Short-Term Bond Fund – A short-term bond fund will have a higher yield but your principal balance will fluctuate so it shouldn’t be used for money you’re planning on spending soon.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Why is important to have a cash reserve?
You should have a cash reserve for three reasons: (1) to avoid running up credit card debt to cover unexpected expenses, (2) to have funds on hand to cover your living expenses for a while if you lost your job, and (3) to have money available to take advantage of an investment or other buying opportunity.
How much should someone keep in a reserve?
A good rule of thumb is to have from 3 to 6 months of living expenses in a reserve. If your income is steady and your job is secure, then 3 months might be fine. But if your income fluctuates or your job isn’t secure, then you should err on the side of caution and build a larger reserve.
How should someone balance the need to keep the funds liquid so they can be accessed quickly with the desire to earn higher returns?
Your cash reserve should have several levels in order to strike a balance between liquidity and higher returns. Consider using the following types of accounts and investments for your reserve funds:
Checking Account – Keep enough in your checking account to avoid bouncing checks and overdraft fees.
High Yield Savings or Money Market Account – This should be the next level of your reserves and can be kept at your local bank or online. Make sure it’s linked to your checking account so you can transfer funds back and forth easily.
Certificates of Deposit (CDs) – CDs earn higher interest rates but most have early withdrawal penalties. You can ladder CDs so you have one coming due every month, quarter, or semi-annually depending on your needs.
No-Load Short-Term Bond Fund – A short-term bond fund will have a higher yield but your principal balance will fluctuate so it shouldn’t be used for money you’re planning on spending soon.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
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