Just how long does it take to make a real difference in your finances? Six months? A year? Five years?
I'm betting it can be done in three months.
Twelve weeks isn't a very long time. But when it comes to improving your financial life, it can be plenty.
I asked Dayana Yochim, co-advisor of our Motley Fool Green Light personal-finance service, how to tackle some common financial goals in just 90 days. Here are a few easy, bite-size, totally doable ideas ...
Get it together (see what's happenin')
You can't move forward without knowing where you are right now. What do your assets look like? How about your liabilities? Taken altogether, are you in the red, in the black, or perfectly balancing at zero?
Most people, unfortunately, have no idea where they really stand -- likely because documenting everything is a pain. Still, unless you sit down and list all your assets and liabilities, you'll have nothing more than a vague estimate of your actual financial situation.
And vague will get you basically nowhere when it comes to making any changes. "The more detail, the better," says Dayana. "But even a rote rundown of your money situation will help you identify specific actions to take to better your finances."
Get the monkey off your back
Now look over your brand-new list. You want to see how much you've got in the way of "bad debt" -- credit cards, car loans, or other IOUs with high interest rates for depreciating assets. "Attack the highest-interest loans with fervor," Dayana says, "devoting all spare change and bonuses to paying those puppies down."
Here at the Fool, we're big fans of a concept called "snowballing" your debt. Here's more information on the technique. As you go, it never hurts to transfer your high-interest balances to lower-interest cards whenever possible.
The payoff won't be easy. "This may require ratcheting down IRA or 401(k) contributions for a time and putting off vacations or cute shoes for a while," Dayana says. "Do it. Ridding yourself of those interest payments is the only guaranteed investment return in town."
Set it and forget it
So you know where you stand financially, and you're totally free of bad debts. Take a moment to pat yourself on the back and hum the theme song to St. Elmo's Fire. Then take a look at where you could be 90 days from now.
Set yourself a few savings goals -- some short-term, like a vacation or a new HVAC system, and some long-term, like college for the kids or an emergency fund. Break these goals down into monthly savings amounts, and automate your savings -- Dayana stresses that this is "very important to do, so you don't feel like managing your finances is a full-time job."
Sock away the money in a high-yield checking or savings account, and don't touch it -- this is your credit-card-debt avoidance money. And, Dayana adds, make sure you plan small rewards (every month, for example) "so you don't feel like a miserable miser and can stay on track."
Market, meet Fool. Fool, meet market.
Ready to dip your toes into the stock market? The Motley Fool Green Light team recommends the same disciplined, step-by-step approach to investing.
Exchange-traded funds (ETFs) and index funds are a great place to start, because they give exposure to the market with low cost and low risk. SPDRs (AMEX:SPY) and Vanguard Total Stock Market ETF (AMEX:VTI) are ETFs that inexpensively track the S&P 500 and the total market, respectively. They're excellent choices for getting started because they don't cost much, give broad diversification, and put you in line with the power of "the market."
Another way to get off the ground is by picking stable, dividend-paying stocks: Procter & Gamble (NYSE:PG), General Mills (NYSE:GIS), Colgate-Palmolive (NYSE:CL), and Altria (NYSE:MO) -- with their familiar products, consistent dividends, and long histories -- are solid choices.
Set yourself up for your golden years
Start saving for retirement. Just do it. This is perhaps the easiest step you can take -- it'll take far less than 90 days (more like 90 seconds), but it's one of the most important things you can do for your financial future. Does your employer provide a 401(k) match? Then take it, or you're turning down free money. Automate contributions to a Roth IRA, even if you've only got $50 or $100 or $250 a month to sock away right now. Just do something to get some money put away for retirement. Let compounding work for you.
Just get it done ...
Finally: Commit to doing one thing a month to put yourself in better financial shape. These don't have to be difficult -- up your 401(k) contribution by 3%; open your first IRA; move your savings to a high-yield account. "Track your progress -- tape it to the fridge," Dayana says. "You'll be amazed how the smallest steps -- just one a month! -- have a huge ripple effect over time."
Getting things done is a big part of the Motley Fool Green Light philosophy. Every issue contains several "Get It Done" features designed to give you the information and resources necessary to take immediate action on issues from establishing a living will to understanding discounted cash flow.
... And start now
At the beginning of this article, I said I was betting that serious changes could be made in just three months. The key is to get going now. I know I am -- as part of an investment club with fellow Fools, we'll be tackling financial goals and tracking our progress during monthly meetings. I encourage you to do the same -- solo, as part of an investment club of your own, or by joining us at Motley Fool Green Light.
You can take advantage of a wide range of our resources (including Money Goals worksheets, discussion boards, and lots more wisdom from Dayana herself), with a 30-day trial. It's free, and there's no obligation. Either way, check back in a month for an update on our progress; I'll be back with details of our adventures as we work toward meeting our goals. The more, the merrier!
Ellen Bowman is an online editor at the Fool. Her money goal is to slay that last remaining credit card. She owns no stocks mentioned in this story, and can both climb the highest mountain and cross the widest sea. Colgate-Palmolive is an Inside Value recommendation. The Fool has a disclosure policy.
