The New Year means lots of well-intended resolutions, some of them financial. Nerd Wallet's "How to Improve Your Finances in 2016" helps us organize and improve our finances in the year ahead with eight steps. Let's look at them:
1. Set goals. Set out your short-term and long-term goals with your family, spouse, or significant other. If you're single, make a list for yourself. Be as specific as you can and brainstorm, then prioritize these items by picking your top four or five. Attach a cost to these to see if they are achievable within your budget.
2. Develop a new budget. Review last year's spending and see how it aligns with your values and your goals. Then, develop a new budget using last year's as a benchmark. Move your expenses to reflect your core values while also incorporating the top four or five priorities from the first step.
3. Open multiple savings accounts. Set aside specific, separate savings accounts for some of your goals to ensure that you won't raid savings for one expenditure to use for another and to make it easier for you to spend money as planned.
4. Summarize your net worth. Include the value of your assets. Include real estate, cash, investments, life insurance cash value, jewelry and cars. Next, list what you owe on auto loans, mortgages, credit card debts, and student loans. The difference is your net worth.
5. Summarize your insurance. Create a summary sheet for your health, life, disability, liability, and long-term care insurance policies and include expirations dates and the basics for each one.
6. Review your investments. See if your total exposure to the stock market makes sense given your risk tolerance and your proximity to retirement.
7. Check on your estate plan. Review the titling of your accounts, your beneficiary designations, and your estate planning documents to see if they still apply or whether changes are needed. Schedule a visit with your estate planning attorney to make the revisions. If you don't have a will, ask the attorney to draft one ASAP. Dying without a will can create complex and expensive consequences for your loved ones.
8. Organize your financial documents. Create a file for all of your financial documents and include a list of all current credit cards, driver's license, monthly bills, the location of your safe deposit box and keys, marriage and birth certificates, passports, online passwords and account numbers and a video recording of your home contents. Personally identifiable information should be in a secure, encrypted electronic file or in a safe deposit box.
Each item on this list is important, but you don't have to do everything all at once. Set aside some time each week to work on your financial to-do list so it's not so overwhelming. It's important to set yearly goals and to simplify and improve your financial picture.
Reference: Nerd Wallet (January 7, 2016) "How to Improve Your Finances in 2016"