Tax season is upon us, which serves as a great time to do an annual review of our financial stability. Most financial experts agree that an annual review is necessary for sticking towards our money goals –bill payments, retirement plans, Hawaiian vacations etc.

According to an ongoing Northwestern Mutual study of over 2,300 American adults (18+), 62% of Americans felt that their financial planning needed improvement, and nearly half stated in particular that “debt makes them feel anxiety on at least a monthly basis,” with the average personal debt (excluding mortgages) being $29,800. However, planning wisely can ease these anxieties significantly.

To regain some of the financial balance that you may crave, follow these simple steps:

1. FINANCING – PAST, PRESENT, AND FUTURE

Once a year, gather your documents and record your balances. Assess three major areas: debt, assets, and income. Whether making a financial plan on an advanced computer program or the back of your lunch napkin, the key is to compare your years past to your current situation every year. You can find areas where you can reallocate your spending and use your money more purposefully.

Remember, life is about balance, and the same applies to your financial situation.

2. USE THE “SNOWBALL EFFECT” TO PAY OFF YOUR DEBT

According to many financial analysts, the “snowball effect” is a proven, effective way to pay off debt. It works as follows: if you had $200 in credit card debt, $10,000 in student loan debt, and $5,000 in car debt, you would pay off your (1) credit card, (2) car, then (3) student loans.

The debt with the lowest amount remaining, not considering interest rates*, should be paid off first. Scientists find that the “snowball effect” is more effective than other debt payment strategies because it provides a quicker dopamine fix – the neurotransmitter that creates the “reward” feeling. People see results faster and want to keep paying debt off. So, roll that snowball!

*Caveat: In some cases, you really should consider interest rates. Talk to your financial advisor if you have questions.

3. BUDGETING APPS

If you want a financial advisor, great! However, there are plenty of apps that provide free financial tracking at your fingertips. Apps like Mint and PocketGuard give comprehensive, easy-to-monitor guidance on your spending habits and available finances. From day-to-day tracking to monthly planning, they can help save you hundreds.

Remember, life and finances are about balance. Strive for progress over perfection. It’s better to do a little planning over a coffee break then to put it off until you have hours of free time. Today’s planning will lead to tomorrow’s successes.

Leave a Reply