A financial fresh 2011

Make 2011 a year in which you’ll organize your financial matters. Whether it’s investing more for the future or simply paying off debt, set a goal.

Here are some key ideas when setting up S.M.A.R.T financial goals:

Specific

Specific goals will help you keep laser-focused. Whenever you need to make a financial decision, ask yourself: “Does this work toward my financial goal?” If you’re considering curbing spending, make a spontaneous-purchase goal limit. For example, in our family we use the “two-week rule”. For any purchases over $200, we take two weeks to consider the item before we buy it. For instance, if I just happen to stumble upon a great pair of shoes, but I wasn’t planning on purchasing them, I’ll take two weeks to consider the purchase. Usually the two weeks passes and I’ve forgotten about them, which means I didn’t really need them and it would have been a waste of money.

Measurable

Breaking down your goal into key measures and tracking it helps you achieve your goal. The goal does not need to be complicated. For example, you may want to set a regular investing goal. Many people set a goal of saving 10% of their pay each pay period. You can then work to set up automated withdrawals from your bank account so that as soon as you get paid, the 10% savings comes straight out of your account. This can help make the goal attainable.

Attainable

When you develop goals that are important to you, you start to figure out ways to make them happen. You’ll find your attitude and habits start to change and your goals become attainable.

Realistic

Your goal is probably realistic if you truly believe you can achieve it. There are also logistical things you’ll need to consider.

One simple way to get out from under a debt load is to consider refinancing your debt into your mortgage. Is this goal attainable for you? Ask yourself these questions: What is the value of my home versus the current balance on my mortgage? Is there equity available to pay out debt?

If you do have equity available, pick up the phone and call a local mortgage broker who can help you determine the next step in the process.

Timely

Set a time frame for when you want to achieve your goal. If you’d like to save $5000 in a tax-free savings account, for example, set a deadline for yourself in achieving this goal. You may also want to break the goal down into increments, which will help you attain the goal.

Use the same principals in setting up your financial goals as you would any other goal you have in your life. The beginning of the year is a great time to revisit what you did the previous year and make improvements for the coming year.

Include a financing condition when you put an offer on a home

Even if you've been pre-approved for a mortgage, I recommend having a financing condition.

Whether you're selling a home and moving into another, or you're buying your first home the financing condition protects you should there be a deficiency in the collateral (the house you're buying).

There are several things that could come up if you don't have a financing condition, here's an example of one:

If you have a 20% down payment, most lenders require an appraisal of the property. The appraisal is ordered by the mortgage broker who contacts a Certified Real Estate Appraiser (CRA) to do the work.This is a third part who evaluates the value of the home. With a 20% down payment most lenders to not insure the mortgage against default, therefore the lender wants to confirm market value. If the appraiser, assess the property for less than the value on the offer you've made, the lender will only give the mortgage based on the appraised value. The impact is that you may be short of funds on closing if you haven't discussed this in advance.

Don't feel the pressure to buy a house without a financing condition, even if you've been pre-approved.