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Question for the Money Doctors

Question submitted on Dec 18, 2013.

Question

Hello! I really need your help and advice. I am a 34 year old professional making 73,000 dollars/year, but I have nothing to show for it. I can''t seem to save money. I managed to pay off 15,000$ in credit cards. I want to become financially fit. I want to eventually own a home, have a family, and have money in the bank, but I don''t know where to start or what to do. PLEASE help me! I really want to turn my financial situation around. As it stands now, I put approx. 15% of my salary away for retirement. I claim zero on my taxes. I pay on muiltiple short term disability accounts (Aflac), not sure what I really need vs. what I don''t need. I also owe about 70,000$ in student loans and approx 1400$ in credit cards. I really need your advice where to start. I am overwhelmed. THANK YOU!

Answer

Hi, thank you for the question. It sounds like you are off to a pretty good start by putting 15% away for retirement. I assume you mean into a company retirement plan (401k, etc.) if that is the case, then you are most likely getting a matching contribution of some percentage of your income. I think the first place to start now is to figure out a budget of what you are currently spending. Use real numbers here - bank statements, credit card statements, etc you want to see where your money is actually going. Most likely a big portion is going towards housing and living expenses. You didn''t mention if you have an auto loan or not, but that payment can often put a big dent in a budget. Once you see where your money is going, then you can start to make some changes and get on track.

I think the first step to creating a financial plan is to make sure you are "safe and secure" - that means having some cash reserves and proper insurance coverage in all areas (life, health, etc.). I can't give you any advice on the Aflac policy, since I don't know the details of your situation. You may be covered by a disability policy by your employer.

What I have found with clients is that many times they are losing money through transfers of wealth and they don't have any idea of where that money is going. Some of the most common transfers of wealth are taxes, how you fund retirement, how you pay for your house, non-deductible interest and other expenses like insurance. Once you plug these "holes" in your budget, you may have plenty of disposable income to save and invest.

Once you figure out where your money is going and where you want it to go, you should consider paying yourself first. For example, if your goal is to save $300/month into a savings account, create an automatic transfer from your checking account that occurs the day you get paid. That way the money is gone before you have a chance to spend it. If the savings account is too easy to access, then open an account somewhere else and put the money there. This may sound simple, but it is easier to save money when you don''t see it or have easy access to it.

These are just a few suggestions. Obviously, to get a professional plan would require going to see a qualified financial planning professional. I hope this gets you moving in the right direction though.


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