Here's how to get a grip on finances


Published: Wednesday, January 17, 2007 at 6:01 a.m.
Last Modified: Tuesday, January 16, 2007 at 11:51 p.m.

MODESTO, Calif. — By now, consumers might be getting their holiday shopping bills, thinking about doing their taxes and planning summer vacations.

All of which makes this a good time for people to get their financial houses in order, say financial experts.

That simply involves a few important steps:

· Step 1: Michael McGrath, a tax preparer and owner of Eagle Consulting & Business Services in Modesto, said people who want to get a grip on their finances have to stop abusing credit.

Many consumers use credit cards to make purchases they don't need or can't afford, especially during the holidays. They also use them to pay bills instead of using cash to cover those expenses.

Stopping such credit-dependent behavior is key to getting finances controlled and to keep them that way.

· Step 2: Once credit restraint is in place, consumers should determine the expenses they know they'll have each month, such as rent or mortgage payments, utilities and insurance, McGrath said.

Once people determine their ongoing expenses, the rest of their finances is easier to get a handle on.

"Those things that you know are starting points," he said.

· Step 3: Keeping track of monthly payments and other financial records also is important. Consumers should create an easy-to-use filing system for bills, paychecks and other documents, organizing it monthly, experts say.

For someone who pays bills or banks online, the system can be easy to set up on a computer and is easy to update when checking balances or paying the monthly bills.

If you're investing, your portfolio, performance statements and contribution ledgers should be part of this arrangement. A will or living trust, life insurance and tax returns also should be easily accessible in such systems.

· Step 4: After stopping the financial bleeding and getting your documents organized, experts say the next step is creating a budget.

McGrath said most people can count on a slight rise in income over a year and can use past bills to tell when more money might be spent.

"Once you've got those known factors, then you start on the unknown things," he said, such as clothes and food.

Traci Murray of Modesto said she took many of those steps when she began organizing her finances a few years ago.

"Is buying an Anne Klein dress an emergency? Probably not," said Murray, 42. She said she has no debt and wants to boost her investments by 10 percent this year. "You've got to let that money work for you."

· Step 5: Financial experts say many people don't factor in expenses that come up only once a year, such as income taxes or a summer vacation, but they should.

A budget that includes saving 5 percent to 10 percent of one's earnings every month can help cover those expenses, said Judy Thompson with ByDesign Financial Solutions.

· Step 6: After creating a plan, experts say, sticking to it can be difficult.

Certified financial planner Mark Royer said it helps to create a copy of the budget and review it every three to four months.

Having someone review it with you to keep you on track also can help, he said.

"If you write down your goals," he said, "then you're more held to accomplishing them."

· Step 7: Getting guidance in following your plan, or venturing into investments, could mean seeking professional help.

"A financial planner can help with people who are serious about their finances but don't have the discipline or willpower to stay with a plan," said Royer of Select Wealth Advisors Inc. in Modesto.

A financial planner also can help define investment goals and how to tweak a portfolio to meet them, said Todd Venturini, a financial planner with Financial Network Investment Corp. in Modesto.

Venturini said when shopping for a planner, consumers should know what planners can do.

Julie Galdon of Patterson, Calif., said her goal this year is to start a 401(k) plan for her family.

"I've been putting it off and putting it off," said Galdon, 34. "But we have to start thinking about college savings and retirement."

Experts agree the new year is a good time to think about those challenges and getting personal finances in order to try to achieve them.

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