Do the math and keep a budget to help New Year’s vows stick
By Ross Boettcher
WORLD-HERALD STAFF WRITER
Anna Berlett of Omaha wants to pay down her debt before tying the knot, then stay debt-free after her wedding day.
Nick Gustafson wants his credit card bills to read “$0” by the end of 2011, and he will put aside cash for planned trips to Atlantic City, N.J., and Virginia Beach, Va. The Omahan also wants to save money for a down payment on a new car next winter.
With 2011 just a couple of days away, most people who make New Year’s resolutions are including at least one money-related pledge. According to a survey by TD Ameritrade, the Omaha-based online brokerage, 75 percent of respondents in its annual New Year’s resolution survey said they would make a financial-related commitment.
That figure is unchanged from 2009, when Opinion Research, a division of Omaha-based Infogroup, also conducted the TD Ameritrade survey. The results indicate respondents’ financial situations are about the same, or that the 2008-09 recession convinced people they need to be smart about how they spend and save.
A majority of the respondents — 55 percent — described their financial outlook for the year as “uncertain, but hopeful the economy is on the rebound.”
Financial planner Louis Scatigna, author of “The Financial Physician,” said even if the economy doesn’t improve people should do the following to solidify their finances and to help make their resolutions a reality.
Determine your net worth
Add up all your assets — savings, value of your home and cars, etc. — and subtract your total liabilities — credit card debt, mortgage principal, loans, etc. The resulting number is your total net worth, or the amount of money you would have if everything you own is liquidated and all debts are paid. The goal, obviously, is to make that number as big as possible.
Make a budget
Online tools such as Mint.com make budgeting a snap. But if you prefer to do it the old-fashioned way — on paper — list in one column all monthly expenses, such as utilities, house payment, car payment, entertainment, groceries, etc. Also record any annual expenses; examples are insurance premiums, or vehicle or property taxes. In the second column list all income: salary, interest or dividends on investments, etc. Now, much like you did when determining your net worth, subtract expenses from income to find out if your spending-to-income ratio is sustainable. If you’re in the black, great. If you’re spending more than you make, you’ll need to trim some of the nonessentials.
A budget allows you to see exactly where the money goes and where reductions are possible.
All together now
Scatigna believes married couples should manage their money together, in consolidated accounts. That avoids miscommunication and one person spending more than the budgeted amount. Also, periodically sit down and pay the bills together, and discuss how to reduce expenses and pay down debt.
Knowledge as an asset
The more you understand your finances, the fewer mistakes you’ll make. Do the research so you make solid decisions on investing, on making big purchases such as a car, home or insurance, and on signing up for credit cards.
Needs are needs; wants are wants
Don’t confuse the two. What do you actually need to live, and what can you do without? Recognizing the difference will have an impact on your budget, your net worth and your life.
Contact the writer:
402-444-1414, ross.boettcher@owh.com twitter.com/rossboettcher
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