By Debbie Gardner
debbieg@thereminder.com
Are you fiscally fit? Do you feel your finances could use a tweak to make life more comfortable? You’re not alone.
“Most of us have the basic knowledge and desire necessary to achieve financial fitness,” said Werner Maiwald, financial consultant, Renaissance Advisory Services of Ludlow, Massachusetts. “However, in today’s world we have many convenient methods by which we can access and spend money.”
Yes, it’s too easy to get off track when it comes to money. But there are ways to get your finances back in order for a better 2016. PRIME got the following “fiscal fitness” basics from local financial experts.
Start with a scorecard
What’s your real bottom line? According to John Bonatakis, CFS, associate vice president, investments, Raymond James, Springfield, Massachusetts, to get a handle on your finances, you first need to create two documents: a budget and a balance sheet.
“Go on the Internet and Google ‘budget,’ you’ll come out with so many tools, ” Bonatakis said. “Know where your income is, and enumerate your expenses.”
Once you get a picture of your spending, Bonatakis said it’s time to move on to creating a balance sheet.
“A balance sheet takes your assets – all you own including property, investments, cars and such – and put it on one side. On the liability side you put your mortgage and any kind of debt,” Bonatakis said. “After you add up all the assets and subtract the debts, you hope you have a positive figure.”
Yes, this part is time consuming, and most of us hate filling out the necessary forms but “the effort is worth it,” Bonatakis said. “You have a baseline of where you are now, and [you] know what need to be done to take that next step.”
Pay down debt
Credit cards are a prime culprit in many people’s budget imbalances, and getting a handle on this debt is a major step to financial fitness.
“Review your credit cards, focusing on paying down balances on the higher interest rate ones, or consolidating them to a lower rate offering,” said Richard R. Bleser, vice president and portfolio manager with St. Germain Investment Management in Springfield, Massachusetts.
Bleser said with interest rates creeping up, refinancing your mortgage – if that move reduces your rate by a half a percentage point or more – is another smart way to reduce your debt load.
Make saving a habit
Bleser said Americans of all ages don’t put enough aside for the future. The remedy to this, all financial advisors agree, is simple – include a plan for savings in your financial fitness program.
“Pay yourself first, because life has a way of drawing from your financial resources,” Bonatakis advised, adding that everyone has bills and taxes and other obligations. “At the end of the day, it’s very easy to have nothing left [to save].”
Maiwald said setting aside just 5 percent of your net monthly income is a good place to start, and you can “constantly increase this as you eliminate debt and find other ways to save.”
For example, you can take the amount you were using to pay off a credit card and transfer it to savings once the debt is discharged, Maiwald suggested.
Bleser said if you are still working, another way to pay yourself first is to increase any salary deferral to a retirement plan such as a 401K.
Examine your investments
Sure, we should all review our investment plans on a regular basis. But it’s easy to put something we won’t need for many years on automatic pilot. Heading into 2016 however, Bleser said the past year’s stock market activity means everyone should give his or her plan – no matter how big or how small – a hard look.
“Be sure to review your asset allocation – your mix of stocks and bonds – with your financial advisor to ensure your portfolio continues to be positioned in line with your risk tolerance and needs,” he said.
Bonatakis said investors can do an initial self-check themselves by analyzing their end-of year statement to see “how [your investments] performed during the year against some of the big benchmarks such as the Standard & Poor’s 500, Barclay’s Bonds and other indexes.
“If there’s consistently a trend in some direction, if there’s a weakness, consider reallocating into areas that are performing consistently most of the year,” he said,
Bonatakis added that checking in just once a year really isn’t enough to keep your investments fiscally fit.
“Look at your investments once a quarter, certainly at mid-year and at the end of the year,” he advised.
Think ahead to taxes
If filing your annual tax returns leaves you scrambling for documents and overlooking deductions every year, James Murray Sr., owner of Jim Murray Tax Service of Springfield, Massachusetts, offers the following “get fiscally fit” advice:
If you claim mileage for an auto expense, be sure you keep an accurate log of your miles that includes your destinations.
Make files for any other expenses – medical, home office, business travel, etc. – and place receipts in those files as you incur them.
Keep a record of all contributions to an IRA or pension plan.
Create files for your bank statements, your W-2 forms and any 1099 or other investment disbursements forms and file those documents as they arrive.
Stick to your plans
Maiwald said the one thing everyone can count on is that their financial position will change – for better or worse – over time. Achieving fiscal fitness however, is within everyone’s reach if they are willing to put in the time and effort.
“Being financially fit is not contingent on the amount of money you make or your net worth,” Maiwald said. “You do not have to be rich to enjoy financial peace and happiness.”
