It’s fall, and time to get organized in your financial life as well as in other areas.
It’s easy to give in to peer pressure and live beyond your means, especially in this age of consumerism where so much weight is put on what car you drive or suit you wear. Every man wants to appear wealthy and successful to his family and friends, and even to strangers. But trying to “keep up with the Joneses” can be the cause of stress and sleepless nights, and can ultimately lead to your demise. For confidence and peace of mind, address your financial situation and life will suddenly take a turn for the better. Here are some simple steps to work to improving your financial situation:
1. Calculate your net worth
The net worth is the value of all of your assets minus the total of all liabilities. Why is it important to know what your net worth is? Basically, it is a way of measuring and tracking your financial wealth and is an excellent indicator of your financial position. Do this on an annual basis in order to monitor financial success.
2. Address any debt issues
Facing your debt may be difficult but essential. You may be able to consolidate and pay off debt over time—seek support and assistance from your local financial institution. If further help is needed, a reputable debt management company can often negotiate your balance/interest rate and formulate a 5-year plan to pay off debt and rebuild credit worthiness.
3. Get to know your credit report
Visit www.annualcreditreport.com. Request a free copy of your credit report every 12 months from each of the 3 credit bureaus: Experian, TransUnion, and Equifax. It is advisable to pull from one credit bureau every 3-4 months to check for identity theft. You can also ensure that all the information is correct and up to date and dispute any errors.
4. Pull your credit score
Most sites demand a fee but CreditKarma.com is a free site that provides credit scores as well as simulations of taking different actions that may affect your score. You can view your score as often as you like without it having any effect. Note that different bureaus and sites vary in the way that they determine credit scores, so the score may be different from different origins. However, seeing an upward trend is the main objective.
5. Implement a budget
This is a lifestyle change rather than a quick fix. Spend your money on paper before you actually have it. Prioritize your needs above your wants and always include payments for debt, savings, and fun. Aim to build an emergency fund. Most importantly, make the budget sustainable to guarantee success.
6. Revise your 401k contribution
If you have the opportunity to contribute to this fund provided by your employer, make sure you contribute the maximum amount, which they will match. Otherwise, you are leaving free money on the table. Reassess your contribution amount and investment selections on a regular basis, and remember, contributions are pretax and can be advantageous when you file your tax return.
7. Plan for Retirement
Don’t put all your eggs in one basket. Consider different retirement options and what risk level feels right for you. Aim to have 10 to 16 times your salary by the time you leave your job less any additional income through pension, annuities, social security, and inheritance. Systematically investing tends to be more beneficial than lump sum investing because you purchase shares at different prices/quantities, which generally results in more shares over time.
8. Safe storage of documents
Keep important documents in a safe place. A safety deposit box, online document storage, or a home safe will protect documents in the event of natural disasters like floods or fire. It will also give you peace of mind that you know where everything is when you need it. Seek advice from professionals regarding your financial choices. Develop a good relationship with your tax professional and financial advisors. Your local credit union/bank can explain options in order for you to make the best choices.
I have covered these financial areas in depth in previous articles, but feel free to contact me with any questions you might have regarding the above!