Understand your assets and liabilities

The assets you own and the debts or liabilities you have determine your net worth.
Assets might include cash, savings, stocks, bonds, retirement accounts, real estate and
anything else of value such as cars or collectibles. Liabilities might include a mortgage,
student loans, auto loans, bills due and credit card debt. Consider calculating your net
worth annually by adding the value of all your assets and subtracting your liabilities.
This can help you keep tabs on your overall financial picture.

Tip: If you’re just out of college and have a lot of student loan debt, you may have a
negative net worth. That’s not necessarily bad. It just means you have some work to do.

2
Assess your goals
Once a year, think about your short-, medium- and long-term goals. Are each still
relevant? How much do they cost? Are you on track to meet them? Some long-term
goals, such as traveling in retirement, may not change substantially year to year. Short-
term goals, such as paying off a credit card bill, and medium-term goals, including
saving for a house, may change more frequently. You might decide to reevaluate those
every three to six months.

3
Check your credit report
Your credit report contains information about the status of your credit accounts and your
bill-paying history. A good credit score is critical to qualifying for loans at the best
possible rates. The Consumer Financial Protection Bureau (CFPB) recommends
checking your report at least once a year to make sure it is up to date and correct. Plus,
the CFPB suggests an extra check before applying for loans for big purchases like cars
and houses. There are three major credit reporting agencies: Experian, Equifax and
TransUnion. You can ask for a free credit report from each of them every 12 months.

4
Name your beneficiaries
When you open a retirement account or buy an insurance policy, you’ll probably be
asked to name a beneficiary—the person who would collect from the account in the
event of your death. Marriage, the birth of children, divorce and death can affect your
choice. Typically your spouse is your default beneficiary, but you also may wish to
designate children or someone else. Though designations likely will not change often,
it’s still a good idea to check your elections yearly to make sure they’re still appropriate.

5
Manage your taxes
It’s important to make sure you have enough set aside to pay your tax bill well before
the annual deadline, generally April 15. The amount of federal income tax you owe each
year depends in part on your tax bracket. For example, for the 2018 tax year, single
filers with taxable income between $9,526 and $38,700 are in the 12 percent tax
bracket (which means that 12 percent is the rate that applies to income in that range),
but many factors affect the final amount of federal income tax you owe in any year.

In most cases your employer withholds taxes from your paycheck, although the amount
withheld will often differ from what you ultimately owe. If you are self-employed,
however, you will likely need to pay an estimated amount of tax instead, usually on a
quarterly basis.

Tip: Each fall, when you still have time to make adjustments before year-end, consider
checking the amount you’ve set aside for taxes against last year’s tax forms.
 6
Check if your investments and goals align
It is likely your investments, whether in retirement plans or taxable brokerage accounts,
consist of mutual funds that hold various kinds of investments. Consider checking
quarterly, in January, April, July and October, to make sure your selections are
appropriate for your age and financial goals.

7
Determine if you have the right insurance
About once a year it’s important to assess the type and amount of insurance you need.
If you rent your home, you may want to consider renters insurance to protect your
belongings. When you buy a home, you need homeowners insurance. Your policy
should cover what it would cost you to rebuild your home—which is often more than
your home’s face value—as well as the current price of replacing your household items.
You also may want special coverage for valuable items such as jewelry or artwork. Your
insurance agent can help you assess whether you have the right type and amount of
coverage.

Tip: If you have dependents, you may wish to consider life insurance, which, in the
event of your death, would pay them cash to help make up for the loss of your income.
You might also consider disability insurance to replace a portion of your income in case
you become ill or are injured and unable to work.

Year after year, getting healthy is a top New Year’s resolution for Americans,
while saving more and spending less typically ranks lower on the list of
priorities. While many people will purchase gym memberships they may never
use, taking steps to improve financial wellness is a resolution worth pursuing,
and sticking to.
 Saving more and spending less is a good place to start when trying to improve
your financial situation; however, many people require additional help to reach
their goals. CFP Board Ambassadors – CFP® professionals who help to
support CFP Board’s consumer advocacy and mission to benefit the public –
offer the following tips to help you become and stay financially fit.

 Create a budget: Creating a budget is a simple way to determine how best to

spend your money. Start by reconciling last year’s expenditures and creating
a list of necessary payments. Giving yourself a “cheap month,” such as
spending $100 a week, can help define your needs. In addition, working with
your spouse or partner can help identify a realistic budget and prevent
overspending.

 Put yourself first: Spending too much on adult children, parents and other
family members can jeopardize your long-term financial situation. Having
children live within a budget will force more careful spending while teaching a
valuable lesson. For adult dependents, spend carefully; you can’t take care of
others if you haven’t taken care of yourself.

 Maximize benefits: Take full advantage of your existing benefits package,

such as your 401(k) or retirement plan. For a 401(k), make sure to maximize
your investment by matching your employer’s contribution. If you operate
within individual funds, rebalance your 401(k) account periodically.
Establishing a dollar cost averaging arrangement – investing set amounts at
regular intervals regardless of the financial climate – for a new account, such
as a Roth IRA or 529 plans, can also increase your savings.

 Know yourself: Many people have chronic issues of overspending or

mismanaging debt. Developing smart habits can improve your finances. If you
fail to prudently spend with credit cards, cut them up. If you struggle to meet
basic payments, round up to the nearest whole number on larger expenses.
For example, if your car payment is $375, plan on spending $400 per month.

Big or small, everyone can take steps to improve their financial well-being.
This year – while you’re working on your physical fitness – get you finances in
shape by scheduling a meeting with a CERTIFIED FINANCIAL PLANNER™
professional who can help you take action to improve your financial situation.
 For more tips from CFP Board Ambassadors for a financially fit 2017, click
here.

10 Habits to Develop for Financial

Stability and Success
BY LEO BABAUTA

Just like any goal, getting your finances stable and becoming financially successful
requires the development of good financial habits. I’ve been researching this topic
extensively in the last few years in my quest to eliminate debt, increase my savings and
increase financial security for my family. I’ll talk more about these habits individually, but
wanted to list them in a summary (I know, but I’m a compulsive list-maker).

Here they are, in no particular order:

1. Make savings automagical. This should be your top priority, especially if you don’t have a solid
emergency fund yet. Make it the first bill you pay each payday, by having a set amount automatically
transferred from your checking account to your savings (try an online savings account). Don’t even think
about this transaction — just make sure it happens, each and every payday.
2. Control your impulse spending. The biggest problem for many of us. Impulse spending, on eating out
and shopping and online purchases, is a big drain on our finances, the biggest budget breaker for many,
and a sure way to be in dire financial straits. See Monitor Your Impulse Spending for more tips.
3. Evaluate your expenses, and live frugally. If you’ve never tracked your expenses, try the One Month
Challenge. Then evaluate how you’re spending your money, and see what you can cut out or reduce.
Decide if each expense is absolutely necessary, then eliminate the unnecessary. See How I Save
Money for more. Also read 30 ways to save $1 a day.
4. Invest in your future. If you’re young, you probably don’t think about retirement much. But it’s
important. Even if you think you can always plan for retirement later, do it now. The growth of your
investments over time will be amazing if you start in your 20s. Start by increasing your 401(k) to the
maximum of your company’s match, if that’s available to you. After that, the best bet is probably a Roth
IRA. Do a little research, but whatever you do, start now!
5. Keep your family secure. The first step is to save for an emergency fund, so that if anything happens,
you’ve got the money. If you have a spouse and/or dependents, you should definitely get life insurance
 and make a will — as soon as possible! Also research other insurance, such as homeowner’s or renter’s
insurance.
6. Eliminate and avoid debt. If you’ve got credit cards, personal loans, or other such debt, you need to start
a debt elimination plan. List out your debts and arrange them in order from smallest balance at the top to
largest at the bottom. Then focus on the debt at the top, putting as much as you can into it, even if it’s just
$40-50 extra (more would be better). When that amount is paid off, celebrate! Then take the total amount
you were paying (say $70 minimum payment plus the $50 extra for a total of $120) and add that to the
minimum payment of the next largest debt. Continue this process, with your extra amount snowballing as
you go along, until you pay off all your debts. This could take several years, but it’s a very rewarding
process, and very necessary.
7. Use the envelope system. This is a simple system to keep track of how much money you have for
spending. Let’s say you set aside three amounts in your budget each payday — one for gas, one for
groceries, one for eating out. Withdraw those amounts on payday, and put them in three separate
envelopes. That way, you can easily track how much you have left for each of these expenses, and when
you run out of money, you know it immediately. You don’t overspend in these categories. If you
regularly run out too fast, you may need to rethink your budget.
8. Pay bills immediately, or automagically. One good habit is to pay bills as soon as they come in. Also,
as much as possible, try to get your bills to be paid through automatic deduction. For those that can’t, use
your bank’s online check system to make regular automatic payments. This way, all of your regular
expenses in your budget are taken care of.
9. Read about personal finances. The more you educate yourself, the better your finances will be.
10. Look to grow your net worth. Do whatever you can to improve your net worth, either by reducing your
debt, increasing your savings, or increasing your income, or all of the above. Look for new ways to make
money, or to get paid more for what you do. Over the course of months, if you calculate your net worth
each month, you’ll see it grow. And that feels great.

Get Financially Fit

1. Get Organized. Consider treating yourself to a post-holiday gift of a financial
organization system. ...
2. Create a Budget. Track your income and expenses to see how much money you have
coming in and how much you spend. ...
3. Lower Your Debt. ...
4. Save for the Unexpected and Beyond
5. Here are the 7 habits that the Financially Fit follow to keep
them in the black, no matter what happens.
6.
1. They Keep The Change
7. When they go to the store, the smart money is on using paper
rather than metal. At the end of every day, the wise will dump
their change in a jar and save it for a rainy day.
8. 2. They Are Organized
9. One major reason you’re living paycheck to paycheck is that
you’re not organizing your finances. Know when the bills are
due, then apportion payments among each pay period. If the
rent is $1,500 per month, set aside $750 each paycheck
(assuming you get paid twice a month).
10. 3. They Are Aware
11. The universe laughs when people make plans, as the
saying goes. We’re all confronted with unforeseen events, and
costs that we didn’t expect. Smart folks act as if they’re going
to need some extra money tomorrow (or later today), and set
aside a few bucks on a regular basis to ensure they won’t fall
short.
12. 4. They Are Forward-Thinking
13. The financially successful know they won’t be this young
forever, and are plotting their exit from the working world.
Whether it’s an IRA or a 401k, they’ve got their eyes on the
long-term prize of a hearty retirement fund.
14. 5. They Are Focused
15. The Elite 24% don’t need cable television with every
premium channel because they know they can buy the full
season of Game Of Thrones for less money than the cost of an
HBO subscription. They know it’s more important to put away a
few dollars than to buy more apps for their phone. Instead, they
make sure every expense provides value to their life.
16. 6. They Are Realistic
17. Ever wonder why so many diets fail? It’s because they
require you to avoid something you love. Take away
someone’s ice cream forever, and they’re sure to ricochet in a
big way. The most financially healthy people know that if they
restrict their ability to spend money on anything, they’ll
 eventually throw up their hands and go overboard the other
way. That’s why they always make sure to keep a few dollars
for enjoyment – be it a magazine subscription, a Spotify
account or that periodic ice cream bar.
18. 7. They Are Persistent
19. Being financially successful requires an understanding
that it’s a marathon rather than a sprint. There will be setbacks,
and the bank account won’t always grow as quickly as we’d
like. Be patient and recognize that you’ll get there in time.
20. I’m sure these aren’t the only habits that the financially
secure Elite 24% practice, so if you think of others place let me
know.