Piggy bank

Financial health, Matt Logan likes to say, is not something one can order on Amazon and have show up in two days.

It takes planning. It’s a long-term process. It can be overwhelming.

Each January, Logan, a certified financial planner, said, he gets plenty of calls from people seeking to make good on New Year’s resolutions to get their finances in order.

“They’ll say, ‘I’ve been meaning for a few years to call you,’ ” he said. “And there’s such a stigma with money. People don’t like to talk about it. So to shed light on things that people have questions about, to be able to point them in the right direction, it’s nice to be able to do that.”

With the holidays in the rearview mirror, and the credit card bills coming due, financial planners advise those looking to pay down debt and build up savings to set realistic goals and to prioritize in order to avoid stressing out.

Tackling debt

Certified Financial Planner Stephen Boatman said he regularly has people who make hundreds of thousands a year walk into his office seeking advice on how to dig themselves out of debt.

“It doesn’t matter how much money you make,” he said. “You can still be in hard financial times if you don’t keep track of it.”

Boatman works at Smith Partners Wealth Management in Greensboro and writes a blog at smithpartnerswealth.com.

Regardless of your salary, he said tackling debt is often a matter of budgeting and setting a strategy for making payments.

Dave Ramsey, a syndicated radio show host who has written extensively about personal finance and debt management, recommends focusing on paying off the lowest debt amounts first, going after the smallest “with a vengeance.”

“When that’s gone, you take the payment that used to be there plus any other money you can squeeze out of the budget and move on to the next one,” he wrote in response to emailed questions. “The snowball picks up more snow and you attack the next one. So on and so on.”

Setting a budget

Logan, who runs financial services firm Matt Logan, Inc. in Greensboro, said one of the biggest mistakes people make when crafting a budget is they insist on cinching their belts too tightly.

“You can’t flip a switch and be a robot on a budget,” Logan said. “If you’re not realistic (in your goal setting), you’re setting yourself up for failure. If your household spends $3,000 a month, it’s probably not reasonable to think you’re going to be able to drop it down to $1,200.”

Setting up a budget, though, basically comes down to figuring out what you have coming in each month, what expenses you have, and what discretionary spending you can and can’t do without.

“You could be making $1 million a year, and if you’re spending a million and one, you’re going broke,” he said. “But the end of year is a great time to be looking at things, because it’s pretty easy to look at your 12 months of bank statements and figure out what came in and what came out, and that’s a good starting point for a budget.”

Tom Luzon, director of the non-profit Consumer Credit Counseling Services of Greater Greensboro, said he sees budgeting as a team sport.

“Everybody in the household over the age of 5 should participate in the budgeting process, so that way, everybody is rowing the boat in the same direction,” he said. “Everybody knows where the money is coming from, where it’s going.”

Building savings

Once you’ve got your debt under control and have a budget in place, focus on setting some money aside.

Marc Diana, chief executive officer of financial planning site MoneyTips.com, suggested trying to build an emergency fund with about three to six months worth of expenses.

“Once you’ve achieved this, channel the same amount you were putting in your emergency fund each month toward saving for your retirement,” he wrote in an email.

Those who have a tendency to overspend, he said, should try to put a little bit of cash in an envelope, and only spend from that envelope. Once the cash is finished, it’s finished, he said.

Luzon said he tells people to try to put aside at least $30 a month.

“People say, ‘$30 a month, that’s not so much, what’s that going to do?,’” he said. “Well, how would you be right now if you’d put away $30 a month your whole life and had that in your savings account now. And if that’s the only amount you can affordably look to save, and you get through the month and that $30 is still in your account, that’s a victory.”

Diana also recommends setting up automatic payments to savings and retirement accounts.

“A large long-term savings goal might seem unreachable when you have a lot of debt, so get started by setting smaller, short-term targets, like saving $20 per week or month,” he wrote. “Once that becomes a habit, and as your debt decreases, you can begin increasing your savings goals. If you have an employer-sponsored 401(k), try to contribute at least enough to get your employer’s full matching contribution, as that is essentially free money.”

Contact Robert C. Lopez at roberto.lopez79@gmail.com.

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