Travis McShane, CFP®, CFA

With the new year comes the annual tradition of setting lofty goals to keep ourselves extra busy through February.

Hopefully, you have made it through the Christmas season with a few dollars left in your savings account, and you can take some time to outline your financial goals to stay on track for the next year (or at least part of the year).

Before we launch into an extensive list of do’s and don’ts, it’s important to remember the primary reason to do any of this: Getting filthy RICH!!! (I’m kidding, of course.) How about we agree that the primary reason to make some changes this year is to have some peace of mind about our money?

Below are some steps you can take this year to help move you and your family closer to financial peace of mind.

Step 1: Figure Out How Much Debt You Have

Gather all of your statements from credit card companies, student loans, mortgage companies, bank loans, and any other place that has lent you money. Here are the two key questions to ask:

• What is the outstanding loan balance?

• What is the interest rate I’m paying?

If you can’t figure these out from the statements, then take the time to dial the 800 number on the statement to have a representative answer those questions.

Step 2: Learn to Say “No Thanks” to Credit Offers

Since you’ve probably been shopping over the last month or so, I’m sure you’ve been offered the chance to apply for a new credit card at least a handful of times. The pitch from store to store is generally the same: “If you apply today, you’ll save 10% off your entire purchase.”

What gets left out is “We’re hoping to get you to spend more at our store, and even better, if you can’t quite afford what you’re buying and need financing, we’d be happy to lend you that money and charge you an interest rate approaching 20% APR.”

It’s safe to say that rolling credit card balances over from month to month is not a recipe for long-term financial success, so keep that in mind the next time the cashier asks you: “Would you like to save 10% off your purchase today?”

Step 3: Figure Out Where You Are Spending Your Money

Before you can come up with a budget, you’ll need to figure out what you are spending your money on from month to month. Don’t beat yourself up here, as you’re not the only one spending too much time at the mall lately. (Which one was it? Brea Mall, South Coast Plaza, Irvine Spectrum, Tustin Marketplace … you get the idea.)

There are several tools to help with figuring out your spending, such as Quicken or Mint.com (which is free), or you can go the old-fashioned spreadsheet approach and track your expenses manually. After you figure out where your money is going, the next step is to develop goals to limit spending in areas that aren’t as important to you.

Step 4: Pay Down Debt

There are a few schools of thought here, but most financial planners agree that it is a good idea to pay down your high-interest credit card debt first. From there, you can take aim at your student loans, or if you have a floating-rate home equity line of credit, then you’ve probably noticed your interest rate beginning to climb with the Federal Reserve raising interest rates.

We’re generally not a huge fan of balance transfers as they tend to prolong the problem, but if you can manage to consolidate high-interest-rate debt to a lower interest rate without adding to the principal balance, then a balance transfer might be a good idea.

Step 5: Pay Yourself First (Save Money)

This is one of the less time-intensive steps because you can put it on autopilot. Decide on a percentage of your paycheck to save (e.g., 5%, 10%, 15%), and have that amount deposited directly to a separate account.

If you don’t have an emergency fund yet, then the creation of one is the first place to direct your savings. After that, if your employer provides a retirement account, then that is a solid option for getting started with your retirement savings. If your employer doesn’t offer a retirement plan, most people with earned income can open investing accounts like individual retirement accounts (IRAs) or Roth IRAs to begin saving toward retirement. There are some tax nuances with each type of account that a financial planner could help you through if desired, but the main idea is to start saving and keep saving.

Start Where You Are

These are just a few steps to help improve your financial health in 2019. If doing all five seems daunting, pick one or two and focus on those. If you’ve already mastered all five, then you can move on to some more complex areas of financial planning, like investment management, retirement income planning, estate planning, insurance planning, and tax planning.

If you’re the type of person who likes do-it-yourself projects, then you have plenty of research to do to continue improving your financial picture. I’d encourage you to do lots of reading, and be careful about your information sources.

If you’re not the DIY type, then I’d encourage you to get in touch with a fee-only financial planner to help you through some of these goals. You’ll be busy with your “going to the gym” resolutions in January, so you should have time by February to start working on your finances.

Schedule a 15-minute discovery call with a fee-only financial advisor to discuss your personal situation.