Improve Your Financial Fitness This October

Did you know October is National Financial Planning Month? Well, then you know what that means, it’s time to look at your finances. Often we overlook our finances, mostly because we don’t want to deal with what we see.  These four steps should make things a little easier for you and give you a great option to work on finances:

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  • Step 1:  Take a financial fitness quiz, such as the one offered by Rutgers Extension.
    • Don’t worry about your score the first time. Let that be your starting point. 
    • Make some changes and take the quiz again in about two months.  
    • Always strive to improve your score. The CFPB (Consumer Financial Protection Bureau) also has a tool to help you determine your financial well-being. 
  • Step 2: Set financial goals. 
    • When developing goals, look at short, medium, and long term.  
      • Short-term goals may include establishing an emergency fund or purchasing a new television. These goals are usually less than a year. 
      • Mid-term goals include those larger purchases such as a car or house.  It can take 5-10 years to save enough money for these items. 
      • Long term goals include retirement. This money you will put in retirement based accounts such as the IRA. These investments will go up and down over time as it is often tied to the stock market. 
      • Goals should also be SMART (Specific, Measurable, Achievable, Relevant, and Time-bound).  The CFPB has a tool to walk you through the goal-setting process.
  • Step 3: Create a spending budget. 
    • Think of it like this: Guide your spending the same way you would drive a car. You know where you are going every step of the way. 
    • You need to know how much is coming in and how much is going out. In the end, it is all about controlling your money. 
    • The Smart About Money Course by the National Endowment for Financial Education has some great information about spending plans and budgeting.
  • Step 4: Invest in the long term. 
    • This can be the hardest step in financial planning. The Federal Reserve Bank of Dallas has a good resource called Building Wealth that walks you through understanding compound interest and includes the investment pyramid. 
    • Keep in mind, there is always a risk when it comes to investing. 
      • Rutgers Extension offers an Investment Risk Tolerance Quiz. We all have different levels of comfort when it comes to investing our money. This quiz will help you understand your level of comfort with risk and can guide how you invest your money.

Now you have four action steps – take a financial fitness quiz, set some financial goals, create a spending plan or budget, and invest for the long term. After two months, you will be sure to see changes! 

Happy National Financial Planning Month!

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