Twice a year I do a major house cleaning and reorganization. I polish the cabinets, clean out closets, either put in screens and wash windows in the spring or in the fall I take out and store all the screens and scrub the windows again. I go through all the children’s clothing and lug bags of used clothes to the Salvation Army. However, like the cobbler’s barefoot children… what I don’t always do (but should), is the same kind of spring cleaning overhaul of my finances. But where do you start a financial clean up?
Below is a list of things you can do to tidy your financial home:
1. Organize your filing in a tiered system. Start by purging your filing cabinets of old documents you no longer need to maintain. Keep paperwork that you will need within the next year in easy to access hanging file folders. Move older documents that you save long term such as tax returns into storage bins and consider a fireproof lockable box for items like your social security card, your will and other difficult to replace documents.
2. Get your free annual credit report and review it closely so that you can resolve any incorrect entries made by creditors.
3. Set up your monthly payments such as mortgage, cars, utilities etc. to be paid automatically through your bank and set up electronic reminders to your phone or e-mail so that you avoid late fees for all variable payment monthly bills such as credit cards.
4. If your workplace allows you to direct your paycheck to multiple accounts, set up a transfer from your paycheck to a savings account and then forget it. Allow the deposits to build an emergency fund for your family.
5. Review your insurance policies including your homeowner’s or renter’s policy, your auto insurance policies as well as life insurance, disability insurance, and any business protection or professional insurance you carry. Ensure adequate coverage and consider shopping around to determine whether you are getting the most competitive pricing for your coverage.
6. Reread your will and any other estate planning documents you have to discern whether changes in your life have necessitated revisions. If you don’t have a will or an estate plan, get some references and get the process started. The peace of mind that comes with a properly executed estate plan is invaluable particularly if you have minor children for which guardianship needs to be indicated.
7. While you are examining your estate planning documents, confirm that correct beneficiaries are designated in all instances including your will, any trusts created, and on insurance policies and retirement accounts.
8. Contemplate consolidating your investment accounts with one advisor. Having a single source for your investment information makes monitoring and rebalancing your accounts more efficient.
9. Set up a household budget. Begin by reviewing checks, credit card statements and debit transactions from the prior year. As you evaluate your spending trends you will understand where you spend the most money and where there may be potential to save. Having a working budget and comparing the budget to your actual spending on a regular basis is crucial for any household serious about their financial planning.
10. Develop short term and long term financial goals. Break the goals down in to 1-5 year short term goals and longer term life goals. If you don’t know where you want to go, there is very little chance that you’ll get there. Once you have established your goals consider employing a certified financial planner to compile a comprehensive financial plan.
Revisit this list annually and take the time to compare your goals to your progress. Next year you will enjoy seeing how the automatic savings you’ve created has grown. You may find it cathartic to purge out documents and move the current year into storage bins and older information in to the shredder. And, you may be surprised when you compare your annual budget to your actual revenues and expenditures. But, most importantly you will have a plan, you will be focused and you will be moving in a positive direction.
No comments:
Post a Comment