Pay Down Debt, Plan for Success

Grappling with excessive debt or poor money management skills is no easy task. As the economy continues to contract, credit card companies lowering credit limits, and job security tenuous, keeping track of your money and wealth is paramount.

Here, David Hinson, founder of Wealth Management Network, a wealth management consulting firm, offers tips on how to get into financial shape. A financial adviser for nearly 20 years, Hinson’s areas of expertise include financial planning and asset protection. If you’re looking to learn more about handling personal finance matters, submit any questions in the comments section below. Hinson will be answering them directly.

Also, be sure to check out our Financial Fitness Checklist for a step-by-step guide on what you can do to boost your credit, savings, and investments. What’s the best strategy for developing a realistic budget that someone can actually follow?

David Hinson: The best way to start developing a budget is to write down — preferably in an [Microsoft] Excel spreadsheet — all your daily and monthly expenses. This will provide a clear picture of where you are today. Then, set a savings/lifestyle goal. For example, I want to buy my own home by age 35, and I will have to save $15,000 for the next three years to get it. Implant that saving goal into your monthly budget as the amount that you agree with yourself to save. Make it easy on yourself by opening a brokerage account (online, at your bank, or with your adviser) and have money automatically moved to that account every month or pay period.

What financial goals should people be making amid the current economic downturn?

Financial goals are not based upon where you are but where you want to go. Dream a big dream and let that be your guide. Often people will say “be realistic.” Every goal is realistic in time!

I recommend:

Saving six to eight months of expenses

Keeping at least $3,000 in cash in a secured place in your home in case of extreme emergency

Pay off 50% of outstanding credit card balances in the next six months

Reduce spending by 25%

Delay big-ticket purchases until you can pay for them with cash. That includes cars, electronics, appliances, clothes, etc.

Why is it important that financial goals be intertwined with life goals?

Because our ability to achieve our life goals are in whole or in part a reflection of our ability to achieve our financial goals. In the absence of considering the power of financial goals, we will not be able to achieve our life goals. In other words, every life goal has by definition a financial component.
With the stock market in flux, retirement savings have taken huge hits. What are some ways people can protect their investments?

The best way to protect your investment is not to panic and make unwise decisions. Be clear on your time horizon and how much you need to achieve your goals. Take a long-term view and continue to save