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Start off the year by investing in your future

Hollywood, MD- One of the most popular New Year’s resolutions people make is to budget better. Whether it is to pay off credit card debt, save more money or make better investments, it’s one resolution many of us fall short on as the year goes on.

How can you follow through with making better budget decisions in 2017? Joanie Smith, Financial Advisor with Edward Jones, said you need to start with all of your financial information. “When our clients come in, we get to know them. We have them bring in all of their financials; what they have in savings, what they have in 401Ks, what their bills are. The first thing we look at is the big picture; where they are and where they want to be and then we try to find a solution to get there.”

First it’s recommended that you have at least $1,000 in an emergency fund. “If you need new tires, or your refrigerator breaks, you already have that money set aside so you don’t have to rely on credit cards.” Smith explained.

Next, if you’re like many other Americans, you have an enormous amount of credit card debt. You should focus on reducing it. “If people make enough money to pay off debt and save, it’s fine. If they don’t, we focus on paying down that debt.” Smith said. She also recommends if you have money sitting in the bank and it’s earning very little interest, use it to pay off that debt. “It doesn’t make any sense to be sitting on that money and instead paying high interest rates.

Getting control of your credit also means changing habits. “If you don’t have the cash to buy it, then you shouldn’t be buying it. Leave the credit cards at home.” Smith said she’ll tell clients to take a big jug of water and throw their credit cards in the freezer so they’re not easily accessible. “Or better yet? Cut them up, they’ll send you a new one eventually.”

Once you get that debt paid down, Smith said it’s important to continue to build your emergency savings. “We recommend you have at least three to six months of your expenses saved in the event you can’t work or lose your job.”

The next step in budgeting should be investments, particularly investing in your retirement. “It’s important to figure out where you want to be when you retire and where you are now. You need to map out what it’s going to take to get there.” Smith said. She explained no matter how much money you have, it’s important to you. “It’s all about what you want that money to do for you. It’s really about what you’re making, living within your means and putting away money for yourself. The only one who’s really going to pay you in retirement is you.”

When it comes to investing, Smith recommends a variety of investments. She said you don’t want to be 100 percent invested in real estate or 100 percent invested in stocks. “There are peaks and valleys. Change happens, volatility happens. If one investment falls short one year, the other picks it up. It’s about finding the right balance, working through the tough times and keep that long term goal in mind.”

Many Americans want to invest in their children’s future and save for college. One of the best ways to do that is with a 529 Plan. It’s a college savings account that is exempt from federal taxes. The program can cover pretty much anything your child needs for school. However, Smith says you need to make sure your needs are taken care of first, “You really need to have your retirement plan in the works to be able to help your child.”

Smith said a building a good budget and developing good spending and saving habits takes time. She said the biggest problem with budgets is people look at their monthly bills; mortgage, car payment, insurance, and utilities. She said you need to learn to account for everything, “They forget about the car tags they have to pay every two years, or they forget about the oil changes, visits to the hair salons or clothes shopping. We try to remind people they need to leave money in savings for that. When the bill comes due or the tags expire, then you already have that money set aside.”

If you don’t think you have any money left over at the end of the month to invest, Smith said think again. “People get too complacent when budgeting. They forget about all of the little things. Take a close look at your bank statement. All of those trips to Wawa or Starbucks for coffee could easily be $25, $30, $50 a month, that’s money to invest.”

Smith said there are many apps to help you keep your budget on track. Even a simple spreadsheet on your computer at home will work, as long as you’re keeping track. “How do you know you’re winning if you don’t keep score?” Smith asked.

If you’d like to schedule a free budget consultation with Joanie Smith, you can call  301- 863-0116.

Contact Joy Shrum at j.shrum@thebaynet.com

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