6 Steps to Stabilize Your Finances

July 15, 2010, By Steve Thompson 0 comments

In the United States, the end of the fiscal year arrives smack dab in the middle of summer, a time when many men would rather be thinking about their family vacations or how to finance a pool for their backyards. Nevertheless, it is always smart to strengthen your finances as much as possible in preparation for the end of the fourth quarter. It's like a late spring cleaning for your investment portfolio and your budget.

Conduct a Retrospective

Picture one of those old film projectors running through snapshots of your finances over the last nine to 12 months. It's time to look back over the last year to see what you did wrong and what you did right.

At the end of the fourth quarter, it is a good idea to examine mistakes and decide which financial strategies will carry over beyond Q4. What investments should be dropped? How did your budget meet your needs? How can you put yourself in a better position for the next fiscal year?

Note Changes

A lot can happen in a year: new jobs, raises, cuts, changes in property taxes and other expenses, medical bills, investment proceeds, additions to the family. If you want to prepare your finances in the last quarter, you must figure out what has changed.

Examine everything from your paycheck to the cable bill, and start laying out your expenses and income for the next fiscal year. Determine where you might cut expenses or increase income (or both) to make you financially stronger over the next 12 months.

Focus on Savings

Corporations often examine their cash reserves in the final quarter. Your liquidity matters as you approach the end of the fiscal year, so take a hard look at your current savings plan and the amount of money sitting in the bank.

If you are underwhelmed by your analysis, start devising a plan to increase your savings. A nest egg gives a man peace of mind and allows him to make smart financial decisions, often allowing him to forgo financing and therefore save on interest for major purchases.

Meet Up

There is a reason why big business involves numerous meetings throughout the fiscal year. Business owners need to be on the same page with their boards of directors, just like men must be on the same page with their families.

Get together with all the decision makers in your house to discuss your finances in the last quarter. What are your impressions? How can you work together to make the next fiscal year better than this one?

A big part of shoring up your finances in the last quarter is setting out a new budget. You've got a clean slate, a new opportunity, so don't waste it. The fourth quarter is all about analyzing, evaluating and making changes.

Assess Your Risk Tolerance

When it comes to investments, risk tolerance is an integral part of making smart financial decisions. How big a risk are you willing to take?

I've always been a low-risk-tolerance type of guy; I tend to play it safe in investments. However, I've learned that my risk tolerance is directly proportionate to my available cash reserves; when I have money in the bank, I'm more likely to take a risk in anticipation of success.

Many men are facing tough times with their families and their jobs, and are therefore more likely to put their money in the bank or a low-yield investment. That's fine. But determine your investment strategy for the end of this fiscal year and the beginning of the next so you know where you're headed.

Drop Dead Weight

Drains on your finances are what you should drop in the last quarter. Figure out exactly where your money is going, and if there isn't a good reason, drop that expense as though it were on fire. You don't need it and your finances might flourish without it.

For example, I've had a 1984 GMC Jimmy for many years (I bought it from my father), and I planned to keep it for the rest of my life. I'd worked on that truck for hundreds of hours, restoring every last inch of its interior and exterior, keeping it in perfect condition. And it was a tremendous drain on my finances.

Maintenance, insurance and gasoline were prohibitively expensive, and last year about this time I decided it was time to let it go. My wife and I constructed a budget and she showed me exactly how much money the Jimmy was costing me. Confronted with that evidence, I had no choice but to cut the strings.

Your financial drain might be subscriptions to unread magazines, investments that yield no profit, a hobby that no longer gives you significant joy, even a house that requires so much maintenance that it's keeping you in debt.

Whatever the case, the last quarter is the time to dump those expenses and start fresh, because who knows what opportunities might await you in the next fiscal year?