• Family Life

30 Day Money Cleanse – Week 1: Awareness

September 1, 2016 | Michelle Brownstein, CFP®

Much like your physical health, your financial health needs a check-up every once in a while. Here at Personal Capital we’re announcing a 30-Day Money Cleanse.

Are you meeting your money goals? Or do you feel like you have to choose between your priorities? Whether you’re saving for a home or planning to retire soon, it’s possible to achieve your goals with just a bit of awareness and careful planning.

During this challenge, we’ll teach you how to invigorate your finances in 4-parts and invite you to take 1 simple step each day for 30 days.

First we’ll talk about awareness, then how to focus on your financial priorities by taking advantage of your options, how to rev-up your plan by putting it into action, and finally how to future-proof your money. In no time you’ll know your finances like the back of your hand, create habits that are critical to sustained wealth creation, and make your money work for you.

Day 1 – Track Down Your Money

List all your financial institutions and your username/password to access them. And I mean all. Banks, credit cards, debt, investment accounts, 401k, IRAs, 529s, all of it. You’ll never have a chance at getting your financial life in order – much less improve it – if you don’t know where you are now.

Day 2 – Identify Your Financial Goals

Make your goals time-bound and concrete: “I want to pay down all credit card debt within 4 months” or “I want to retire at 50 with $2M saved.” We all have goals and whether you’re paying down debt or saving for a home it’s important to set a date and make a plan. Without clear guidelines forward, it’s far too easy to overspend on discretionary items as well as miss opportunities for wealth creation.

Day 3 – Use an Aggregator

There’s no need to make things harder for yourself than they need to be. Use Personal Capital or Mint.com to see at a glance your spending by category to identify where you spend the most.

Day 4 – Know How Much You Make

When it comes to your money, knowing rough estimates isn’t doing you any favors. Not putting that money to work in investments or your retirement accounts means you’re leaving opportunities to grow your wealth on the table. Check your pay stub and see how much you actually take home after taxes, health insurance, etc.

Day 5 – Know How Much You Spend

Automatically bucket expenses into categories (e.g. insurance, debt payments, rent/mortgage, groceries, or discretionary spending like clothing or dining out). It pays to know how much of your money goes where. You might find that dining out is costing you hundreds more dollars a month than you intended.

Day 6 – Prioritize Your Spending

Rank all of your discretionary items from most to least important – if you’d rather dine out than shop for clothes, your ranking should reflect this.

Day 7 – Calculate Savings

Now that you know how much you bring home after taxes and insurance every month, put that extra capital to work! Subtract your monthly spending from your monthly income. Add that total to any retirement plan contributions (e.g. a 401k) so you see how much you can save. Over time, allocating leftover sums of money over time can mean the difference between traveling during retirement or owning a second home.

Check out our entire Money Cleanse Series:

This communication and all data are for informational purposes only and do not constitute a recommendation to buy or sell securities. You should not rely on this information as the primary basis of your investment, financial, or tax planning decisions. You should consult your legal or tax professional regarding your specific situation. Third party data is obtained from sources believed to be reliable. However, PCAC cannot guarantee that data’s currency, accuracy, timeliness, completeness or fitness for any particular purpose. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

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