Your Personal Finance: 5 Step Year-End Action Plan

We’re coming up on the time of year again when we start taking stock of the past year and planning for the next one.  If your personal finance goals largely went unfulfilled this year, it’s time for you to take a step back, re-evaluate your goals and make plans now to make 2009 the year you take control of your personal finances.

Here’s your personal finance - five step action plan - you can implement today that will help cut debt and get you on the path to financial recovery.

Create a budget – You know that planning to fail is a roadmap to financial disaster.  Yet, millions of Canadians unwittingly do that every day by flying by the financial seat of their pants.  Payday comes and they pay the bills that are due.  Once the bills are paid, they spend the rest like there’s no tomorrow.  Not only is this financial suicide, it’s an incredibly hard situation to climb out of.  Bills trickle in throughout the month and – while this pay period might be unusually light from a bills perspective – your next pay period could be extra heavy. By creating a budget for every category of your financial life you can see where every penny is going and you can reduce spending when you see that one or two are completely out of whack.

Keep Score – You wouldn’t play a basketball game without keeping score and you should do the same with your personal finance.  Each month, track every penny of money that comes in and goes out.  Over the course of several months you’ll develop a running average for fixed and variable expenses, so you can see what you should reduce spending your hard-earned cash on.

By keeping score, you’ll get a real grasp on exactly how much cash you waste on a daily basis.  For instance, you might see that you’re wasting $60 every month on that fast food breakfast that you “have to have”.  When faced with the reality that a dollar or two a day really adds up over the course of a month, you might decide to cut back on those side trips to the drive through every morning. 

Eliminate Credit Cards – Too many credit cards can be a temptation you don’t need.  Let’s face it: when we have a credit card in our pocket, we tend to buy today what we want and then pay for it over the course of a year or two.  Instead, eliminate the extra credit cards and force yourself to pay cash.  Not only will you save on interest payments, by paying cash you’ll spend less on each purchase as well. 

Review Credit – Your credit report might have errors, mistakes, and outdated accounts listed.  Each mistake on your credit report may only be a few points, but those points tend to add up.  A lower credit score can cause you to pay more in interest payments and can even mean the difference between approval and denial of a credit application.  So make sure your credit report is accurate and that your potential creditors have an accurate picture of your personal finances when looking at your credit.  If your credit report is wrong, take steps today to fix the erroneous entries.

Emergency Fund – In these uncertain economic times, you may feel exposed to the risk of losing your job or weathering a sudden financial storm without having the cash necessary to tide you over until you get back on your feet.  By setting up an emergency fund, you can be ready for anything life cares to throw your way.  

These five steps are critical to you reaching all of your personal finance goals.  Take stock of your financial situation today and make 2009 the year you finally turn the corner to financial prosperity!

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