4 Financial Areas Where Small Steps Could Make a Big Difference

By: Michael J. Searcy

Some of the most important financial issues in our lives are never addressed because they feel too overwhelming to tackle. Our brains revert to thinking if we could just devote one day, one week, one month to accomplishing a task, it would instantly be complete. Because that thought process can set us up for failure, training our thoughts to work in a new process can be the advantage we need to accomplish our financial goals. By understanding that each small step is an accomplishment, we can focus on the overall picture. When it comes to being prepared and financially secure, even the slightest edge can set us far above the crowd. Here are some common issues and tips for achieving that slight edge:

1. Organization
Getting everything in order is one of the first steps to financial freedom, and often the most daunting. Breaking this task into steps can ease the transition. Start by allocating a binder or filing cabinet to hold your financial statements and label each section or folder into bank statements, bills, insurance policies, investment accounts and any other important sections you require. After you have a base for organization, you can spend 10 minutes each week placing statements from your stack into the appropriate sections.

2. Debt Elimination
Using the snowball effect can give you an edge to eliminating debt. While it may seem practical to eliminate your largest debts first, try reversing that idea. By tackling your smallest debt first, you will not only see the number of commitments reduced, but once the smallest is paid off, you can re-direct your former monthly obligation toward the next largest debt and continue this process until it is paid off. Then re-direct what you had been paying on debt #1 and #2 to pay off debt #3 and so on, thereby gaining momentum with each debt eliminated.

3. Avoiding Cash Crunch
Keeping up on your taxes monthly can save you from a cash-crunch headache at the end of the quarter or at year-end. Starting an account to accumulate these funds throughout the year ensures your cash is ready when needed. Paying in increments, rather than promising to pay in full, can keep your cash flowing and bills from mounting. Also, prepare for large future purchases by creating an account and saving the amount needed in advance, you can pay in cash and avoid additional debt.

4. Future Generations
The best edge you can pass to your heirs is to get them working toward their financial goals early. By taking advantage of the principle of compounding interest, starting a small savings program now can be far more beneficial than starting a large savings program when they get older. Opening an IRA or 529 education account in their name gives them an edge for financial success in the future.
So go ahead, make one small change today. These small, incremental steps give you the edge in accomplishing your larger financial goals. Like the saying goes, “How do you eat an elephant? One bite at a time…”

Originally published in MD News

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Searcy Financial Services, Inc.

The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.  

Published for the blog on December 6, 2014 by Searcy Financial Services, your Overland Park, Kansas Fee-Only Financial Planner and Investment Manager.