Give Yourself a Financial Check-Up Once a Year
You change your oil in your car every 3000 miles, change the filter on your
furnace every 3 months and change the batteries in your smoke detectors twice a
year but when was the last time you gave your finances a complete check-up?
Financial experts recommend that you look at your financial situation at least
once a year to see how you are doing - especially as you prepare to add
college expenses to your budget.
Here are the items you should
look over for changes or updates.
Budget. Each year you
should re-evaluate your household income and expenses to see where your money is
going. The goal is to be able to pay down debt while saving money so you can
eventually get ahead. If following your budget has gone by the wayside since the
last time you looked at it this is a good time to reset spending and saving
priorities. Budget does not have to be a bad word; it is the means by which you
will eventually be able to have the things you want without going into debt for
them.
Retirement savings. Whether you have a retirement
through your employer or your own 401(k) or IRA or both you should look at what
you are currently contributing to these accounts and whether or not you can
raise that percentage. Many times people will set up these accounts when they
start working and forget to add additional percentages to them as their income
rises. Contributing as much as you can, up to the maximum allowed each year,
will raise your retirement income substantially. Re-evaluate what you can afford
to invest in these accounts each year so you are making the most of these
tax-deferred accounts.
Savings. Saving for your
retirement is wonderful but you should also have a savings account that is
easily accessed in case of an emergency. The experts have always suggested
having at least 3 months income put aside for a rainy day so that is a good
start for a goal. Each year you should evaluate your income versus your expenses
and decide just how much you can put aside for your savings. The best course of
action is to make the savings a priority and put that amount away first before
letting your expenses get the best of you. Even if you are only able to put away
5 to 10% of your income each month you will be surprised at how fast it adds
up.
Investment portfolio. If you have a large investment
portfolio you are no doubt looking at it constantly to get the most from your
money. Many people, however, may invest money into a few areas and then never
think about it again for months or years. You should look at your investments to
see if you have your money working for you to your best advantage. Most
investment counselors will set up an annual review with you but if yours doesn’t
then be sure to set up an appointment yourself. No matter how big or small you
portfolio is, it is still your money and you need to understand what is
happening with it on a regular basis.
Pay down credit card
debt. Each year you should look at your credit card debt and decide how
much you can afford in payments with the ultimate goal of eliminating it.
Consolidate your debt onto low interest cards as much as possible and be sure to
make the highest payments on the cards you pay the highest interest on. You can
get out of credit card debt with some careful budgeting and a little
willpower.
Mortgage. You should look at your mortgage to make sure you
are getting the best possible interest rate with the safest loan. While you
don’t want to refinance every year you will want to check on interest rates
periodically, especially if you have a high interest rate or an adjustable rate
mortgage. Keep an eye on the market in case a better deal does come along
sometime down the road.
Check your credit report. You
should check your credit report often but if time has slipped by since the last
time you checked it now is the time to do it. If you’ve canceled any credit
cards over the past year you will want to make sure they have been taken off of
your report. You will also want to check for signs of identity theft. Keeping
your credit report clean will help you acquire lower interest rates when you go
to the bank for a loan.
Insurance policies. You should
re-evaluate your insurance needs each year to make sure you are covered to the
full extent. This includes life insurance, disability insurance and homeowners
insurance. As your income grows and as you acquire more possessions you will
need to adjust your insurance. Look over your policy each year when it is due
and have your agent make adjustments as needed.
Be sure you are looking
at your finances realistically as you set your yearly goals or re-adjust your
savings and budget. Setting goals that are too high may keep you from sticking
to them. By setting realistic goals and keeping an eye on your finances you will
be able to look ahead to a financially secure future.
