Shaping up your financials

We know what you are thinking… you've read a million articles on getting yourself financially fit. They all give the same advice and you've tried a few of the tips over the years with little success. Well, we vow not to rehash the old ideas you're referring to.

We know that a woman who has reached the level of professional success that you have, is faced with a unique view of finances. Chances are you make more money than your husband, you don't want to drop your country club membership or weekly nail appointment in order to gain financial fitness and you have the additional benefits such as stock options to manage. So this article will be different because it's specifically written with a BlueSuitMom in mind. Keeping that in mind, if you approach each tip and item of advice seriously with a sincere effort to gain control, we believe you'll see some light at the end of the tunnel.

Warm-Up: Set Goals
You probably know why you are working but do you know what you want to do with the money you'll earn? You probably have a whole list of goals in your mind so now all you have to do is write them down. Putting something on paper always looks differently than it does in your head. You might surprise yourself with what you find. Many of your distant goals may seem very close and obtainable. Your list may include a new convertible, a summer home at the beach or simply a Cartier watch.

Once you've written them all down, attach a cost to each and an approximate time in which you'd like to reach the goal. Divide the list into 1 year, 5 year, 10 year and 20 year goals. This will help you prioritize them as well. Calculate how long it will take to save for major purchases with our financial calculator

Get Ready to Stretch
Now that you've set goals and made a timetable, the next challenge is to find a way to pay for the items on your list. First, take a financial inventory by figuring out what you have and what you spend. Lots of women say, "oh, I don't really have much of anything" but when they add it all up, it's a good-sized list of assets. Include your savings, any items such as a house, car or real estate, your personal property, such as your clothes and furniture and your pension, profit sharing or other benefits from your employer. In short, everything. Try to put an accurate value on all the items on your list.

Do the same for your liabilities. What do you owe? List each creditor and the outstanding balance and monthly payment. Together, your lists of assets and liabilities make up your personal financial statement - a picture of your present financial life. But to get where you want to go, you need a tool to help you manage your cash flow.

Ready, Set, Exercise a Budget
How many times have you asked yourself, "Where does all my money go?" If you are like most of us, you've never sat down to see just what it cost to run your household and where you spend money.

I challenged my husband and I several years ago to write down every dime we spent for a month. We were so surprised to see how much we spent ordering pizza and eating out after spending $150 a week at the grocery store. It was like a lightening bolt hit us between the eyes. Look at it this way, if you were at the office, you'd know your cash flow, so why not arm yourself with the same knowledge at home? You can't manage your cash flow without a budget. It's that simple.

Your budget should include fixed expenses (all your everyday living expenses such as mortgage/rent, loans, utilities, food, child care, and periodic expenses such as insurance, medical and dental treatment, and taxes) and flexible expenses (such as recreation and clothing). Don't hedge on your budget. Include everything - even expenses for gifts and entertainment.

If you find a lot of your income is unaccounted for - the vanishing cash syndrome - challenge your family to keep a list for a week or two and write down every cash purchase you make.

Once you know where you are spending your money, it's time to make a different type of budget. This one isn't a historical record of how you've spent your money in the past - it's an allocation plan for how you'll spend your money now and in the future.

Along with your rent, utilities and other necessary expenses each month, you should add two categories to your budget: an emergency fund and a capital fund.

Your Emergency Fund
Financial experts advize that you should have an emergency fun of at least three-six months worth of expenses in your savings. If you are short, your first priority should be to build up your emergency fund.

Keep your emergency fund liquid - that is, in a savings or money account, or short term CDs or Treasury Bills. Somewhere it is safe, earning some return on your investment but easy to get to in the event you need it.

Bulking Up Your Capital Fund
Try to set aside at least five to ten percent of your take-home pay or income in a special fund. Call it your capital fund. The object of the capital fund is to have a pool of money that is available to invest - money that doesn't just go to pay for daily living. A good way to build this fund is to find direct withdrawal mutual funds that will deduct the money from your checking account each month. If they take it before you actually can spend it, you'll never even realize it's gone. You will be happy though when your quarterly statement reflect a growing balance. It goes back to the old rule of paying yourself before you pay anyone else. Another good habit is to always contribute half of any raise, bonus, or windfall to your capital fund. Let it go to work for you, to help you accomplish your financial goals.

A Few Exercises Amount to Overall Fitness
Don't think that small amounts of money don't matter. The power of compounding is tremendous. Just one dollar a day adds up to more than $2,000 at the end of five years, assuming an interest rate of only five percent. That's $2,000 that would have just trickled away at one dollar a day - money you'd never miss.