No one likes to be blindsided by financial hardship. Listed here are 10 ideas to help ensure your financial situation stays healthy.
Plan to have a minimum savings balance to cover at least three months’ of expenses (ideally, this should be six to 12 months). If your reserves are light, start saving now. Even if it is a little amount, it can get you on the right track.
“A good way to quantify your savings pool for a time frame is to review your prior year expenses, focusing particularly on fixed costs such as utilities, real estate taxes, groceries, etc.” – Rich Middleton, CPA
At least once a year develop a basic budget. Set goals and try to hit them. If this seems overwhelming, start simple. What is coming in and what goes out each month? Becoming aware is the first step to improving your financial health.
“Alternatively, invest in a software program such as QuickBooks or Quicken to track your income and expenses. This will facilitate budgeting as well as the safety net.” – Rich Middleton, CPA
If you die, does your significant other know where everything is? Can he/she pay the bills? Does he know where account numbers are? Does your spouse know who you use to help with things? If not, it is time to start talking.
“Consider sharing responsibilities; one spouse can pay the monthly bills while the other tracks and records the various inflows and outflows using a software program.” – Rich Middleton, CPA
Once a year review beneficiaries on all accounts. This includes retirement accounts as well as names on wills and estate plans. The legal hassle created without this review can be devastating to your surviving family. This is especially important if you had a recent life event (marriage, divorce, birth or death).
Make sure you review your retirement plans to maximize any employer match in your account. Also review your plan’s administrative expenses. If they are too high they can cost you thousands of dollars over your lifetime.
If your home burned down or was flooded, are your important records easily accessible and protected? If not, consider creating a disaster plan. This may include placing important documents in a safe deposit box in another location than your home. Piggy bank and stethoscope
With the recent increase in identity fraud, plan to check your credit with the major credit agencies once a year. The agencies are legally required to make their report available to you annually without charge.
“Although you can check your credit report with the major agencies once a year, the free report does not provide a credit score. In addition, you do not have to get all three reports at once. If you want to be on top of your credit report throughout the year, you can request one report at a time and then wait four months to request another. Typically all the credit agencies provide the same information. Be sure to remember when and from which agency you requested a report as you need to wait twelve months to get another report.” – Chris Cicalese, CPA
Periodically look at your health, life, home and liability insurance. With the legal nature of our society, you might consider the need for an umbrella policy to cover against potential litigation. But also consider flood insurance and a replacement value homeowner’s policy.
Review your use of credit cards, loans, etc. Understand your net worth (assets minus liabilities). Make progress in reducing your debt load starting with the highest interest obligations first. Is your debt lower than it was last year?
“If you have trouble controlling credit card spending, consider paying in cash only or using a debit card.” – Rich Middleton, CPA
Just because you are taking steps to improve your financial situation doesn’t mean that you can’t have fun. Be smart about your entertainment spending. If you are planning a vacation, research money-conscience options and have a budget that fits in with your other financial goals.
This list is by no means complete, but if you focus on the areas mentioned, your financial life will become more planned and less likely to be struck by an unforeseen surprise. Contact us for financial guidance and to set up a customized plan for you and your family.
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