Some great tips for getting your financial house in order… see here or see below for the article text.
This year is more than half gone. Amid your summer vacation and plans for fun in the sun, find time now for your mid-year financial checkup.
Like many, you probably picked a financial goal for this year, such as pay off debt or generally get your financial house in order. Now reevaluate your intentions and take a good look at where you stand. Start reviewing the following:
• Spending plan. Cash flow management is key to a successful financial future and knowing where your money goes a must in creating a plan.
If you still need a spending plan, use Excel or another application to start tracking where your money goes. Scrutinize amounts you pay for such fixed expenses as your mortgage or rent, car, insurance premiums and utilities. Pay yourself first (via savings or investing) before laying out for variable or discretionary expenses such as entertainment, clothing or other, extracurricular activities.
This tracking allows you to pinpoint areas and categories where you may need to make adjustments, such as decrease dining out to put more toward savings for travel or a home down payment.
• Debt management. Did your credit card and personal debt balances decrease or increase so far this year? Review your statements to track your progress (if any) in the last six months.
When paying down debt, either give priority to your accounts carrying the highest interest rates first or target your lowest balances for payoff first. Your spending plan also comes into play with debt reduction: Review where your money goes and target any areas you can cut back on to help you accelerate payoff.
• Savings and investments. Is your emergency fund of three to six months’ expenses fully funded or do you still work toward that first $1,000? What about taking advantage of employer retirement plans and contributing to your company 401(k)?
Set up a systematic transfer from your paycheck to your savings or investment account – and then forget it. For Roth individual retirement accounts and employer retirement plans, saving in smaller, automated increments minimizes your cash flow strain and sets the stage for a disciplined investment strategy.
Also review allocation of your investment accounts and make any necessary adjustments or rebalances.
• Personal and asset protection. Nothing can send your dreams off course faster than inadequate insurance coverage in time of need.
If you’re single with no dependents, for example, make sure you’re covered for disability, health, home, auto and personal liability. If you’re married or others depend on your income, add life insurance.
Reach out to your insurance agent or broker to ensure you hold adequate coverage. Take into account updates for potential transitions in your life such as marriage, the birth of a child, job loss, an increase in your income, a remodeling of your home, big ticket purchases, death or divorce.
• Estate planning. Review or create your family trust, wills or powers of attorney to allow others to make your health-care decisions if you’re incapacitated; do it now. If you have children, also establish guardianship provisions.
The more clearly and concisely you document your intentions, the better. Although this planning area may make you uncomfortable, your family and you need a current plan outlining your wishes and specific requests for after you die.
Don’t worry if you’re behind on some of these; getting on track financially is a journey, not a race. Set small goals and tasks for yourself and remember to celebrate your achievements along the way for the rest of 2014.
William A. Olson, CPA: Contact me at wolsoncpa.com