Financial stability relies on willpower
Next to physical health in the New Year, financial stability resounds as the theme of many New Year's resolutions.
From paying off holiday debt to planning for the future, local financial experts weigh in on the healthy practices of money management.
Kristen Garrett of Advantage Credit Counseling Service, formerly known as Consumer Credit Counseling Service of Western Pennsylvania, compares spending habits to eating habits."Most of us know that drinking lots of soda, eating fast food five times a week and overindulging in sweets is bad for us, but some people do it anyway," Garrett said. "Likewise, many of us know we should have a budget, balance our checkbook, pay off our debt and save more money, but we don't do it."As public relations coordinator for the nonprofit credit counseling service, Garrett said a fresh financial start in 2008 should include setting a household budget.All expenses, including mortgage or rent payments, utility bills, food, toiletries and debt payments, should be factored in.Households also should plan for periodic expenses like insurance payments, car repairs and maintenance, or taxes.For example, if your car insurance premium is $1,200 a year, you should plan to set aside $100 each month. If you already have a budget in place, you should revisit it to see if adjustments need to be made for increased or decreased costs in certain areas.Garrett also advised tracking expenses to find out exactly where money goes each month. If you notice an area where you are overspending, look for ways to cut your expenditures in that area.Also, Garrett said that if you haven't already done so, make it a priority to pay off debt. You can't pay off your debt if you continue to use credit. Make a rule not to buy anything unless you can pay with cash.Check your credit report at the start of each year, she said. Each year, consumers are entitled to a free copy of their credit reports from all three reporting bureaus. Get your report at annualcreditreport.com or by calling 877-322-8228. Correct errors by contacting the credit bureau.Garrett also said it's wise to balance checkbooks each month to be sure your calculations are in line with those of the bank.Get into the habit of paying all of your bills on time, including your mortgage and utilities. Late fees are costly and quickly derail your budget.Create a cash flow calendar that lists all expenses and their due dates to help you stick to a payment schedule. Plus, having a visual record can help show which paychecks will be earmarked for certain expenses.Revisit your utility and insurance plans. Make sure you have the appropriate level of service or insurance coverage.For example, if you have a mobile phone calling plan with 500 minutes a month, and you are using 700 minutes a month, you might be able to save money by switching to a plan that offers more minutes for less money than you're paying in overages.Be prepared to eliminate discretionary spending from your budget if necessary. This may mean taking your lunch to work more often or foregoing a daily stop at the coffee shop to have more money to pay off debt or put into savings.Finally, once you've established a budget and have looked at ways to reduce expenditures, set aside some money for savings. Decide how much money you can afford to put into savings on a weekly or monthly basis. You can start small and increase the amount you save if you are able to in the future."A lot of the information seems like obvious, common-sense stuff, and it is common-sense stuff, but the tips are still things many of us just don't think about," Garrett said. "A person can get back on track with their finances by changing their money habits, just like people who want to lose weight can do so by changing their eating habits."
Beyond simply making ends meet, other types of financial advice extend to planning ahead.Lyric Schnur, a financial adviser with Hefren-Tillotson in Butler, works with a system called Masterplan, a comprehensive financial strategy."Everyone has various relationships," Schnur said, pointing to relationships with attorneys for estate planning, with banks for checking and savings accounts, and with insurance agencies, financial planners and tax preparers. "But rarely does anyone sit down and see how all of these mesh together. It's like the pick-up sticks game; you'd be amazed how one stick can change the others."As part of her services, Schnur will initially sit down with a client for free to design a comprehensive plan. After that, the relationship with the financial adviser begins.Retirement funds and gifting are two things people think about this time of year, she said. Hot topics also include how finances will be affected by the election year and where the dollar and oil prices are."It's a good time of year for people to get a better perspective of what they own," Schnur said.Dick Musko, owner of R.P. Musko and Associates Wealth Care Consultants in Butler, also helps people design their financial futures.Musko described two phases of any financial plan: accumulation and distribution."Depending on someone's age, that includes investing wisely for growth or protection, measures to take should something happen to your health or even death, children's education, elder care, estate planning, insurance and investing."He has found people now are more savvy about certain issues like the stock market, but they still procrastinate about doing something about it."I try to educate people, because if I just tell them to do something and they're not educated about it, they're not going to do it."The foundation for any well-designed plan should have a will, power of attorney and a living will or health directive, Musko said."I did a survey about 10 years ago of people who came into the office," he said. "Eight of 10 of about 350 to 400 people said they didn't have wills."He said clients mostly fear running out of money in retirement and having a health problem, so they work together on a plan that could include life insurance, health insurance, long-term care and guaranteed lifetime income products.The worst thing to do is to do nothing, Musko said. "The biggest thing to get people to understand is they can't bury their heads in the sand."So if your New Year's resolution features a financial component, the best thing to do is to do something about it.
