Improve Your Financial Shape in 2012

Lose weight. Exercise more. Save more money. These are the top three New Year's resolutions most people make every year. Although I can't help you lose weight or exercise more often, I can help you improve your financial shape in 2012. Follow these financial tips to get in shape - fiscal shape, that is.

Failing to Plan is Planning to Fail

Individuals with established financial goals are at a decided advantage over those who merely react to events as they occur. Financial goals should be ranked in order of importance and quantified in dollar amounts and time frames. "To live a good life" is too nebulous and vague. "I want to own a house in Santa Monica in five years." "I want to pay for my daughter's college education when she enters college in 15 years." "I want to be able to retire at age 65." These are measurable and quantifiable goals that you can work towards with the assistance of your GK financial advisor, who can help you establish a plan using the financial resources you have and quantify them in terms of reachable objectives.

Pay Yourself First

If there is one thing I want you to remember from reading this article, it is this: PAY YOURSELF FIRST. The reason so many people can't save money is because they use the wrong approach. Most people receive their paychecks, then they pay their bills, they buy groceries, get their morning Starbucks, a little shopping, dining out, movies, and at the end of the month there is nothing left to save. A better way is to set aside (at least) 10% of your gross income right after you get your paycheck. Pay yourself first! You are the most important "bill" you have. Your future and the financial well-being of your family should be priority number one in your budget. Your GK financial advisor can help you set up an automatic transfer to occur right after you receive your paycheck. Out of sight, out of mind. You will adapt and learn how to live within your means. I promise you.

Too Much Money Left at the End of the Month? Stick to a Budget!

A budget is a great tool used to plan and evaluate your spending patterns. It is an estimation of all income and expenses and a financial roadmap for day-to-day living. An individual or family that operates within a budget generally has fewer financial problems than those who pay bills as they come. Follow these simple steps to get started:

Step #1: Identify your financial goals and determine what is required to reach them with the help of your GK advisor

Step #2: Estimate your income

Step #3: Estimate your expenses and stay within the recommended range. Here is a list of the most common expenses:

- Housing expenses (mortgage or rent, HOA, property taxes) -> 28% to 33% of gross income

- Car expenses (note/lease payment, insurance, and gas) -> no more than 10% of gross income

- Student loans and other credit card debt -> no more than 10% of your net income

- Emergency fund -> 3 to 6 months of expenses in a liquid account

- Utilities (electricity, cable, gas, water & trash, phone)

- Household items and supplies

- Food and groceries

- Health and life insurance premiums

- Entertainment/recreation/wellness

- School tuition/childcare

- Clothing, including laundry and dry cleaning

- Savings and investments

- Charitable contributions

Step #4: Compare income and expenses. If expenses are too high, attempt to identify potential sources of additional income or places where expenses may be reduced. If expenses are lower than income, make sure to apply the difference towards your savings and investments as this will bring you and your family closer to your goals.
Your desire to meet your financial goals will provide you the motivation you need to stay within your budget. Have a great 2012!

Danilo Kawasaki, CFP®
Vice-President and COO, Gerber Kawasaki Wealth & Investment Management
Registered Principal, Sagepoint Financial, Inc.
2716 Ocean Park Blvd. #2022
Santa Monica, CA 90405
(310) 441-9393

Securities offered through LPL Financial, member FINRA/SIPC. Investment advisory services and fixed insurance offered through Gerber Kawasaki, Inc., a registered investment advisor and separate entity from LPL Financial.

This material contains forward looking statements and projections. There are no guarantees that these results will be achieved. Investing involves risk including potential loss of principal.