FREEDOM

Become Financially Independent In 2014

WRITERS: THOMAS FROSS AND ROBERT FROSS

SUCCESSFULLY NAVIGATE THE NEW YEAR BY ESTABLISHING A FINANCIAL PLAN WORTH FOLLOWING.

Should auld finances be forgot and never brought to mind? Certainly not! Start 2014 on the right foot with a resolution to be financially independent. The beginning of a new year is the perfect time to sit down as a family, evaluate your finances, and set goals for the year. Here’s a plan to help you make 2014 the healthiest one yet.

Hold a family meeting

The first step to success in the New Year means reviewing last year’s finances, identifying any areas of improvement, and getting everyone on board with your goals for the year. It’s important not to neglect the emotional and psychological aspects of family finances. Accountability and commitment to success are significantly improved when everyone in the household feels included in the planning process and understands the family goals.

Gather financial documents such as bills, account statements, credit card statements, and any other documents needed to build a comprehensive picture of your finances. Total last year’s spending and determine whether you’re staying within your means (and meeting savings goals) or if you’re off track. If you’re not doing a great job of abiding by your budget, identify the areas where you’re spending too much money. It’s pretty common for sneaky budget overages to accumulate where you least expect it, e.g.

credit card finance charges, hefty cellphone bills, and those “miscellaneous” expenses for which you can’t account.

Use this time to plan the year’s major anticipated expenses, like family vacations, big purchases, insurance payments, holiday spending, and anything else. Planning for these expenses will help ensure you have enough money on hand to cover them instead of having to reach for a credit card. Also, use the opportunity to shop around for better insurance quotes and ask for a lower credit card interest rate.

Plan a monthly budget

Using information from the past year, create a monthly household budget. It should be fairly easy to determine your fixed expenses, which include things like rent or mortgage payments, car loans, utilities, and phone bills. Estimating variable expenses like gas, entertainment, and grocery budgets can be a bit harder, and reviewing your check register and credit card bill may help. If you’re not sure where you spend your money, collect your receipts for a month or track expenses in a notebook. Create a miscellaneous category for those odd expenses that don’t fit anywhere else; however, if you notice that your miscellaneous spending is a large part of your budget, you may want to create more categories for better control.

Add in monthly contributions toward your major anticipated expenses so that money is being set aside every month. Don’t forget saving for the future! When you make saving a regular part of your monthly expenses, you’ll be much more likely to get into the saving habit. You may find it helpful to automatically transfer a certain dollar amount into a savings or investment account every month. A financial adviser can help you understand the many benefits of saving early and often and work with you to develop a long-term strategy to help meet your financial goals. es so that month.

Build an emergency fund and pay down debt

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An emergency fund protects your family from unforeseen circumstances like the loss of income or an unexpected major expense. We suggest the average family build a cash fund to cover three-to-six months’ worth of expenses, though every family has different needs. It’s important to have this cash reserve so you’re not forced to rely on credit cards or liquidate your long-term investments for cash. It’s also very important to pay off any high-interest credit card balances or personal loans so you can wipe out finance charges.

Motivate yourself to reach your goals

Reaching your financial goals takes commitment. Sit down regularly as a family to review your budget and progress toward goals. If you have a tough time sticking to your budget, you’re not alone. Research into behavioral economics shows many people struggle with forgoing short-term benefits (such as shopping and eating out) for longterm goals (like saving for retirement or a big family vacation).

We will leave you with some tips on changing spending habits to help reach your financial goals.

• Curb impulse buys by staying away from shopping malls or leaving your credit cards at home.

• Motivate yourselves with small rewards when you complete financial tasks or meet intermediate goals.

• Involve your family members in discussions about which financial choices will benefit you the most in the long run. Will eating out daily give you the most pleasure, or would you rather put that money toward a long-term goal like a family vacation?

We hope these tips will help you and your family achieve your resolution to be financially independent in 2014.

ROBERT AND THOMAS FROSS founded Fross & Fross Wealth Management with the shared vision of creating a truly world-class experience for their clients. Specializing in offering comprehensive financial planning to high net-worth retirees, Fross & Fross manages over $300 million in assets and maintains a stellar reputation of professionalism and experience throughout The Villages.