Set Yourself Up for $ucce$$ in 2021

by Expert Contributor Mike Brady, MBA, of LPL Financial

The new year is a great time to start a new habit! If one of your New Year’s Resolutions is saving money, here are some simple ways to accomplish that.

Set up a budget. That will require some work, but the benefits more than offset the time invested. How you create your budget is up to you: It could be as simple as a piece of paper and a pencil, or as elaborate as using a program like QuickBooks.

The first element of any budget is your income, which should be your “take home” (net) pay. Once you know that amount, you can use a budget to make sure you don't spend more than you earn, thus helping to reduce debt and free up cash for savings.

Next, you need to know how you currently spend your money. Start by tracking your spending for a month. Gather bills and receipts. Don’t assume any expense is too small to record. Categorize your expenses, starting with those that are fixed such as your mortgage/rent or car payment. Then move on to variable expenses like utility bills. Finally, make sure you include your monthly discretionary spending such as food, shopping and entertainment.

Once you know where your money goes, it's time to analyze your expenses. You probably can’t do much about fixed expenses without moving or getting rid of your car. However, if those expenses are greater than your monthly income, you are probably carrying too much debt to effectively save. To cut spending, review your variable expenses and your monthly discretionary spending. That’s where the real work can be done.

One area to examine closely is credit card debt. If a high balance is keeping you from saving, you need to find ways to trim that monthly payment. Call your credit card company and ask them for an interest rate reduction, or shop around for a card with a lower rate on sites such as CardTrak and Bankrate. Beware of cards with a low introductory “teaser” rate that increases to a much higher rate after six months.

You may want to consider a home equity loan or a consolidation loan. Before taking any loan, make sure you can afford the monthly payments. Banks can foreclose on a home equity loan within 90 days if you miss four payments.

A budget is a living document. As your personal circumstances change, so will your goals and needs. Review your budget every few months, to make sure it reflects your goals and to see if you’re saving as much as you possibly can.

Expert Contributor Mike Brady, MBA, of LPL Financial

TRUST MATTERS.

Especially when it's YOUR money.

Have you ever wondered who your financial advisor really works for? I work strictly for you. I work hard to build a relationship of trust by providing thoughtful, unbiased guidance and placing your interests first.

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MICHAEL BRADY, MBA

LPL Financial

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michael.brady@lpl.com

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