Owning Your Finances in 2014

Five steps for taking control of your financial future.

2014 is the year to take control of your finances. This is not the typical “lose 20 pounds” or “change my life” sort of New Year’s resolution, but taking control of your finances has powerful ramifications. It can lead to a secure financial future. And it will make you happier.

Follow these five simple steps:

1. Embrace the concept “Control the Controllables.”

Many things are outside of our control. We cannot control what is happening in Congress or whether the stock market plummets next week. However, there are many things we can control, and they have a much greater impact on our financial security.

We can control how much we save, how much we spend and whether we live within our means. We can control whether we place an emphasis on family and friends, whether we favor experiences over things, and whether we focus on gratitude. We have control over our finances, and our behaviors and actions impact our financial security.

2. Create a net worth statement.

The net worth statement form is in the book “The Joy of Financial Security.” Investment and bank accounts often become scattered, so it can prove to be challenging to wrap your arms around your finances. The net worth statement is an essential step. Update it each year and you will see progress quickly.

3. Determine how much you currently save.

This form also is in the book and on the website. It will help you determine your current savings percentage. Commit to increasing your savings a few percentage points each year, aiming for 15 to 20 percent of your pre-tax earnings.

4. Analyze your current investments.

Determine your tolerance for loss and select an asset allocation. (I recommend a balanced asset allocation so that you will be less vulnerable to the next financial crisis than you would be with a more aggressive portfolio). Are your current investments diversified? Have you weeded your garden (eliminated everything that is not performing well or that is no longer appropriate)? Are the expenses within your investments low?

5. Commit to stop keeping up with the Joneses.

This takes a deliberate commitment because it is so pervasive in our society. The pressure to keep up with the Joneses is toxic to financial security. Commit to not needing to replace your car yet, or purchasing another big-screen TV or new clothing. Put the money you are saving toward building an emergency fund, extra savings and investments or some family experiences.

Here’s an added reward for your effort. Talk with your family about your commitment to not keep up with the Joneses. Tell your kids or grandkids that you are living within your means—that you are saving for their college, for your retirement, for a rainy day. This presents a prime opportunity to be a great financial role model. You’ve conquered five easy steps, your finances will benefit and you will become happier.

 

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Donna Skeels Cygan has been recognized as one of the top financial advisors in the U.S. and has been quoted in many publications, including The Wall Street Journal, The New York Times, Forbes, Kiplingers, Newsweek and Investment News. She is the President of Sage Future Financial LLC in Albuquerque, New Mexico, and serves clients across the U.S. She is the author of “The Joy of Financial Security.” 

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