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Back To Basics | By Eric Nobles

Bankruptcies, foreclosures and layoffs, there’s no doubt about it, 2008 was a tough year. From a credit crunch to sinking 401Ks, almost everyone felt the financial troubles of the past year. But financial problems can be particularly harmful for this community; military personnel with crushing debt could face sanctions or even have their security clearances threatened.

The Government Accountability Office found that 20 percent of junior enlisted soldiers had trouble making ends meet. And this fall, Congress passed a new law that exempts reservists from the time-consuming tasks needed to file for bankruptcy.

Good financial planning can prevent these problems before they escalate. So what can we all do in 2009 to protect ourselves and our families? Get back to basics.

A key component to returning to basics is living within your means or simply spending less money than you make. One way to accomplish this is to separate “needs” from “wants.” You may want to eat steak at a restaurant when grilling chicken at home is all you need. If you find yourself having trouble living within your means there are things you can do. First, keep a careful log of every monthly expense, down to the candy bar you purchased for 50 cents. This will help determine problem areas and spending patterns. A $4 coffee habit, for example, can add up fast.

Cut spending by using cash instead of credit cards. You are much more aware of spending when you have to part with your hard-earned cash as opposed to swiping a credit card. By building an emergency fund worth three to six months’ of expenses, you will be better prepared for life’s unexpected bumps in the road, keeping you out of financial troubles.

Where do you stand? If you’re not keeping score, how do you know if you’re winning or losing when it comes to assets and debts? This is a good time of year to compile a spreadsheet showing your net worth. If it sounds complicated, it’s not; simply add your assets and subtract total debts. Now you have a benchmark with which to compare your future net worth. If your net worth grows each year, then you know you are heading in the right direction. Or, you may want to save more and reduce debt so your net worth will grow more quickly. Military personnel have an excellent opportunity to do both during deployments when their take-home pay increases.

If you are comfortable with your net worth, you may want to spend a little more on one of the “wants” in your life. If net worth drops, then you need to look into it. Drops in consecutive years could tip you off to trouble ahead. Knowing where you stand financially makes it a lot easier to face the tough decisions life often throws our way.

We are all going “back to basics” in 2009. Saving more, spending less and paying down debts is the best way to prepare for the future.

Eric Nobles is a Certified Financial Planner with Nobles Financial Planning, Inc., which offers securities and advisory services through Geneos Wealth Management Inc., member FINRA/SIPC.