Along with the standard spring rituÂals of preparing your taxes, adjusting your clocks for daylight-savings time, testing your smoke detectors, mulching your yard and watching your March Madness brackÂet implode, consider making the following financial checklist part of your ritual.
â€¢ Take a Financial Snapshot. Would your loved ones know how to manage the finances if you passed away suddenly? Organizing your finances is the key to understanding them, and to making plans for their growth. First, list every asset you can possibly think of from investÂments to tangible personal property, and assign an objective value to each. Next, list every debt or liability that you have. Mortgages, credit cards, tax debts and student loans all apply. Your net worth is your aggregate assets less your aggreÂgate liabilities. Compare your net worth now to what it was last year and conÂsider changing spending habits accordÂingly. Second, organize all login informaÂtion for your accounts. Because of the sensitivity of this information, it is likely you have this information concealed or encrypted; make sue that your trusted loved ones know how to access this information. Third, in most families, one person manages the finances and has a better understanding of the overall finanÂcial picture. Prepare a financial cheat sheet, containing the institution, account numbers for those institutions and any other pertinent information that may be needed, including CPAâ€™s lawyers and other professionals.
â€¢ Create or Replenish an Emergency Fund. Personal finance advisors recommend maintaining a minimum of six months of living expenses in cash or other liquid funds, adjusting accordingly for families with sizable monthly expenses relative to other assets. Just as the TARP banks are required to pass a Stress Test, consider whether your family can handle a finanÂcial hiccup in stride.
â€¢ Start Budgeting. Tracking everything you spend down to the last dollar can be difficult. So, focus on two or three probÂlem areas, such as dining out or clothing purchases.
â€¢ Start or Increase Retirement or EducaÂtional Contributions. It is never too late or too early to star t saving for retirement or educational needs. Check to see if you are maximizing your employer-sponsored retirement plan and what additional savings places you may have available to you, including IRAâ€™s and 529 Plans for your childrenâ€™s education.
â€¢ Rollover Old Retirement Accounts. Did you switch jobs last year and just leave your 401k account in your old employerâ€™s plan? Consider rolling it over to your new employerâ€™s plan or, better yet, to an IRA. Consolidation accounts will allow you to better understand, monitor and manage your investments.
â€¢ Rebalance your Investments. Stocks and bonds can move in very different direcÂtions in short periods and your 50/50 alÂlocation to stocks and bonds may have shifted. Check whether your current asset allocation is consistent with your objectives and risk tolerance. For comÂparison purposes, â€œAge in Bondsâ€ is an oft-repeated rule of thumb.
â€¢ Review Home, Auto & Life Insurance. Your insurance needs change from year to year. Please take the time to review your policies and available coverage.
â€¢ Review Beneficiary Designations. Who is the beneficiary of your retirement acÂcount or life insurance policy? If you have not checked in a while, it is a good idea to do so, especially if you have had a change in family status the last few years. Remember that your estate planning documents do not supersede the beneficiary designation on these acÂcounts.
â€¢ Do a Home Inventory. If your home burned to the ground tomorrow you would never be able to replace certain items. However, you can make sure that you are compensated from your insurance carrier for their loss. Tour your home with a camera and document everything you would want an insurance company to replace. Add up the reÂplacement costs for all of those items to make sure you have enough insurance.
â€¢ Backup Important Records. In conjuncÂtion with the foregoing, it is valuable insurance to maintain backup copies of important records (e.g. estate planning documents, birth certificates, deeds, insurance policies, tax returns, etc.). AlÂternatives to hardcopies, such as exterÂnal hard drives and online storage, exist for this purpose. Do the same for digital photographs and home movies.
â€¢ Check Credit Card Statements for SusÂpect Fees and Charges. How closely do you inspect your statements? Take the time to go back and check for inapproÂpriate fees and charges, especially if you have vendors with automatic monthly charges.
â€¢ Review Credit Reports. Check reports from all three major credit bureaus once each year at annualcreditreport.com. Closing old inactive accounts may ding your credit score but can provide some peace of mind.
â€¢ Redeem Reward Points. The dirty secret of gift cards and rewards points is that they expire or decrease if not used or the corresponding account is inactive. Even if they do not expire, keeping them around increases the odds that you will lose or forget about them.
â€¢ Review your Estate Plan. A review is appropriate whenever you experience life-changing events, such as the birth of a child, separation from a spouse, disability or terminal illness, death of a family member, or major changes in your finances or in the estate tax law.
â€¢ Contact your Cable Company. I personÂally believe that cable companies aim to charge you as much as they believe you are willing to pay. With a simple call you may learn that they are currently ofÂfering a â€œpromotional discount for valÂued customers.â€
A little preventative maintenance can go a long way in avoiding larger problems down the road.