Advice for financial stability

After the season of freely giving (and heavily spending), people are ready to rein in their finances for the New Year.

Christopher Theis, a financial advisor for the Edward Jones investment firm in Ocean View, offered some tips for starting the New Year right.

“The first thing would be to put together a budget and make a resolution to keep it,” Theis said.

To plan a future budget, Theis said, you should first examine the past. He recommended tracking expenses for three months, then categorizing the money spent for utilities, groceries, gasoline, dining out and so forth.

Actively budgeting shows the bigger picture of where the money goes each month. Theis advocated computer software, such as Quicken or MSN Money, which track money and can even link directly to bank accounts. He has personally budgeted electronically for 10 years.

“If you spend more than you make, you’ll have to cut some things out,” Theis reminded consumers.

Then begin saving. Theis suggested placing 10 percent of each paycheck in savings. First, begin an emergency fund that covers three to six months of expenses. For instance, a household that spends $2,000 each month will want to have $6,000 to $12,000 in a money market or savings account.

Remember that this is an untouchable account. It is not a rainy-day fund for a weekend in Vegas. If the household’s breadwinner is suddenly unable to work, the emergency fund will provide a financial buffer.

Once that savings account is in place, get rid of unsecured debt. Theis noted that credit cards are “a big obstacle” to financial stability. Do not pay the bare minimum each month; pay more because interest is a killer.

After handling the short-term goal of securing debt and building an emergency fund should consumers begin long-term planning for retirement and children’s college educations, which are a specialty of the Edward Jones firm.

For college savings, there are the 529 college savings plans, for which there are no taxes on growth or interest. You can choose from any state’s plan, not just your own.

According to Theis, the best way to prepare for retirement is with 401K plan. If your employer matches your funds in a company plan, that can be free money. A Roth IRA is also handy, as money is taxed when it goes in, not when it comes out.

From paying debt to saving money, “the most important part is planning,” Theis emphasized. “Have a plan of where you want to go.”

That will make managing finances much easier and, hopefully, lead to a greener New Year.