Set financial goals. In order to create the financial life that you want you have to translate it in your own terms. Clearly defining what your goals are will make you more excited about creating a strategy to reach them. The McElroys should start by creating a list of specific short-, mid-, and long-term goals. So far they have been casual in their goal setting, generally saying, “I want to be debt free.†Get specific. Instead say, “I want to pay off all of our credit card bills by March 2013,†advises be. That is a goal you can put a future price on and can calculate. “If they continue to allocate $1,000 toward paying down credit card debt, the credit cards will be paid off within five months,†says Austin. They should continue this process until they have listed all of their goals, set target dates, estimated the cost, and budgeted for each goal. After paying off their credit card debt they can then begin to tackle other goals, and “then reallocate the $1,000 toward savings,†says Austin.
Establish an emergency fund. The couple estimates that $20,000 is a good savings number that they would like to have in an emergency fund. Although $20,000 may sound like a nice cushion, should they become unemployed, just their monthly expenses alone will quickly absorb the fund in about three months, Considering this economy, individuals are out of work longer and other costs such as medical expenses or home and car repairs could send them back to relying on their credit cards. The McElroys should save at least six months of their expenses, or about $40,000, in a liquid savings account. They should use the $2,000 winnings from the contest to establish the fund and put their savings on autopilot.
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