Your Biggest Money Worries Solved ! #6 I need to Develop a Financial Plan

Worry 6: I Need to Develop a Financial Plan
A financial plan will help you achieve the things that are most important to you, whether that means paying for your child’s college education or creating a fund for a vacation home. It’s broader than a budget, encompassing savings, investments, and even insurance. Who needs a plan? Anyone who feels anxious or confused about her financial situation.

Do Right Now:
Write down the names of three people you know and admire who are diligent about money — say, your father-in-law, your next-door neighbor, and a former boss. Call each of them and ask a simple question: How do you plan your finances? You’ll come away with a wealth of practical recommendations, as well as the realization that none of this is rocket science.

Next Steps:
Do some reading. Try browsing around the site www.getrichslowly.org, a great all-around personal-finance website by blogger J.D. Roth, who writes entertainingly and knowledgeably about digging out of debt and investing for the future. A good basic book is Get a Financial Life, by Beth Kobliner (Fireside Press, $15, www.amazon.com). Although it’s aimed at people in their 20s and 30s, it’s a fine introduction to financial planning for people of any age.

Find a planner. If you want some hand-holding (and who doesn’t?), hire help. Look for a fee-only financial planner — the kind who charges a set price, averaging $200 to $250 an hour. Because she’s not making money from commissions on investments she sells you, you know her advice will be objective. To find an adviser, start by asking friends for recommendations. You can also go to the site run by the National Association of Personal Financial Advisors (www.napfa.org) and click on “Find an Advisor.” Also try the Garrett Planning Network (www.garrettplanningnetwork.com), another network of fee-only planners, and click on “Locate an Advisor.” Look for the letters CFP (certified financial planner) after the adviser’s name. That designation means the adviser had appropriate training and passed a rigorous test.Before you make an appointment, ask the planner if she is willing to have a short initial meeting with you at no charge, so you can make sure you feel comfortable with her before moving forward. (The Garrett Planning Network’s site has a comprehensive list of questions to ask at the first meeting.) A planner will help you create a solid game plan that takes into account your financial needs and priorities. And because you’ve paid for the advice, you’ll be more likely to follow it. “Once you pay for something, to not follow through feels like a waste, like throwing food away,” says author Jason Zweig. That’s just one more way to trick your brain into doing the right thing.

Your Biggest Money Worries Solved ! worry #5 I need a budget

Worry 5: I Need a Budget
If you find yourself consistently short of money or you never seem to have enough funds for a vacation, a budget can help. A budget is simply a plan for how to spend your money. It doesn’t have to be fancy. In fact, the key to sticking to one is to make sure it’s both realistic and simple, says Jeffrey Pritchard, a financial planner in Beaumont, Texas, who writes the blog www.allfinancialmatters.com.

Do Right Now:

Grab a blank notebook. Write down everything you spent money on today, from the utility bill you paid by check to the bus ride you paid for with cash. Do the same thing tomorrow, and so on, for a full month. “That’s the only way you’ll know where your money is going,” says Pritchard.

Next Steps:

Take stock. At the end of the month, create basic categories — like food, clothing, shelter, and savings — then allocate your expenses accordingly. (If you’re computer-savvy, putting them into a simple Excel spreadsheet can make the math easy.) If you know you have certain areas of weakness, like eating out, break those out in more detail (restaurant meals, breakfast at a coffee shop, etc.).

Play with the numbers. Now that you know how much money you spend each month, you can divide it in ways that are more satisfying. For example, if you want to have more to spend on cultural events (like plays and concerts), maybe you are willing to forgo hair coloring at the salon. You should end up with a list of all your expenses and how much you would like to spend on them each month. Use this as a guideline for future spending.

Sign up for an online money-tracking program, like www.wesabe.com or www.mint.com. If you do your banking online, you simply link one of the programs to your bank and credit-card accounts and the program automatically grabs your spending activity from those sources and categorizes it for you. For example, if you put $125 worth of groceries from Whole Foods on a credit card, www.mint.com or www.wesabe.com records that in the food category. Then you can check your actual spending against your budgeted spending whenever you want, without having to save scraps of paper and enter the information by hand. However, you do have to remember to enter cash transactions. These programs can see that you made an ATM withdrawal, but not what you spent the money on, making them best for people who use debit or credit cards more frequently than cash.

Your Biggest Money Worries, Solved ! #3 I'm frustrated by high Gas Prices

Worry 3: I’m Frustrated by High Gas Prices
Energy prices, in general, are on the rise, but the most dramatic spike has been for gasoline — up one-third over the past year, to an average $3.05 a gallon. If commuting to work by bike is unrealistic, consider these options.

Do Right Now:
Go to www.gasbuddy.com and enter your ZIP code. You’ll be connected to a network of websites that pinpoints which gas stations near you charge the lowest and highest prices. For example, a recent search of the Chicago area found a Marathon station in Oak Forest charging just $2.91 a gallon, vs. $3.53 at a downtown BP. Plan your next fill-up accordingly.

Clean out the junk in your trunk. Hauling around unneeded poundage — a case of water, tools, a spare stroller — forces your car to work harder. A hundred extra pounds in the trunk reduces fuel economy by up to 2 percent, according to the U.S. Department of Energy (DOE). If you spend $200 a month on gas, shedding that weight can save you $48 a year.

Next Steps:
Check your oil, air filter, and tire pressure. Keeping your car well tuned can increase fuel efficiency by up to 17 percent, according to the DOE.

Treat your car like your skin. Keep it out of the sun whenever possible. That’s because gasoline can evaporate right out of the tank (especially when the cap isn’t screwed on tight), and it evaporates faster when the car is hotter. So always drive straight into the garage, rather than parking in the driveway. When doing errands, park in the shade or in a parking garage.

Buy a fuel-efficient car. When it’s time to replace the car you have, go to the DOE-run website www.fueleconomy.gov. There you can compare the fuel efficiency of various models. You’ll find, for example, that driving a small hybrid car (average purchase cost: $22,000) for 25 miles costs $1.60 in gas, compared with about $5 for a basic four-wheel-drive SUV (average cost: $31,000). If you drive 10,000 miles a year, your savings would be nearly $1,400.